Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698943605670.pdf (Zambia)
REPUBLIC OF ZAMBIA REPORT OF THE COMMITTEE ON PARASTATAL BODIES ON THE REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF PARASTATAL BODIES AND OTHER STATUTORY INSTITUTIONS FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER, 2020 FOR THE FIRST SESSION OF THE THIRTEENTH NATIONAL ASSEMBLY APPOINTED ON 16THSEPTEMBER, 2021 Published by the National Assembly of Zambia REPORT OF THE COMMITTEE ON PARASTATAL BODIES ON THE REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF PARASTATAL BODIES AND OTHER STATUTORY INSTITUTIONS FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER, 2020 FOR THE FIRST SESSION OF THE THIRTEENTH NATIONAL ASSEMBLY APPOINTED ON 16th SEPTEMBER, 2021 Table of Contents a.
Composition of the Committee.......................................................................................................... 1 b.
Functions of the Committee .............................................................................................................. 1 c. Meetings of the Committee ............................................................................................................... 1 d. Procedure adopted by the Committee ................................................................................................ 1 PART 1 ..................................................................................................................................................... 2 1.0 Auditor General‟s Comments ........................................................................................................... 2 2.0 Scope and Methodology of the Audit ............................................................................................... 3 3.0 Internal Controls ............................................................................................................................... 3 PART II .................................................................................................................................................... 4 CONSIDERATION OF SUBMISSIONS FROM CONTROLLING OFFICERS AND CHIEF EXECUTIVE OFFICERS ...................................................................................................................... 4 4.0 BANGWEULU WATER TRANSPORT: MINISTRY OF TRANSPORT AND LOGISTICS4 4.1 Budget and Income ............................................................................................................................ 4 4.2 Operational Matters – Non-operational Cargo Vessel....................................................................... 5 4.3 Procurement Matters - Failure to Follow Procurement Procedures .................................................. 5 4.5 Staff Related Matters ......................................................................................................................... 8 4.6 Asset Management
 .......................................................................................................................... 11 4.7 Infrastructure Development -Stalled Project – Construction and Rehabilitation of Maritime Infrastructure ................................................................................................................................... 12 4.8 Loss of Revenue - Incomplete Rest House and Restaurant K 337,740 ........................................... 13 5.0 BANK OF ZAMBIA ..................................................................................................................... 13 5.1 Governance-Onerous Conditions of Service ................................................................................... 13 5.2 Financial Analysis ........................................................................................................................... 15 5.3 Operational Matters ......................................................................................................................... 17 6.0 COPPERBELT UNIVERSITY: MINISTRY OF EDUCATION ............................................ 25 6.1 Governance – Failure to Prepare Annual Reports ........................................................................... 25 6.2 Budget and Income .......................................................................................................................... 26 6.3 Failure to Account for Revenue from Bed Spaces .......................................................................... 27 6.4 Financial Analysis - Statement of Comprehensive Income - Operating Deficits ............................ 28 6.5 Operational Matters ......................................................................................................................... 29 6.6 Administrative Matters .................................................................................................................... 30 6.7 Staff Related Matters
 ....................................................................................................................... 35 7.0 INDUSTRIAL DEVELOPMENT CORPORATION ................................................................ 36 7.1 Governance – Lack of Prescribed Tenure of Office for Board Members ....................................... 36 i 7.2 Budget and Income .......................................................................................................................... 37 7.3 Financial Analysis: Failure to produce Consolidated Audited Financial Statements ..................... 38 7.4 Operational Matters ......................................................................................................................... 39 7.5 Staff Related Matters ....................................................................................................................... 47 8.0 JUDICIARY .................................................................................................................................. 48 8.1 Budget and Income .......................................................................................................................... 48 8.2 Accounting Irregularities ................................................................................................................. 49 8.2.2 Non-Remittance of VAT K 40,535 .................................................................................................. 49 8.3 Staff Related Matters ....................................................................................................................... 50 8.4 Asset Management ........................................................................................................................... 52 8.5 Delayed Completion of Infrastructure Projects ............................................................................... 56 8.6 Other Incomplete Projects
 ............................................................................................................... 57 9.0 KAPASA MAKASA UNIVERSITY: MINISTRY OF EDUCATION ..................................... 57 9.1 Budget and Income .......................................................................................................................... 57 9.2 Failure to Prepare Financial Reports ............................................................................................... 58 9.3 Operational Matter - Failure to Operationalise the Library ............................................................. 59 9.4 Accounting Irregularities ................................................................................................................. 60 9.5 Administrative Matters – Failure to complete the Development of a Website ............................... 62 9.6 Asset Management .......................................................................................................................... 63 9.7 Staff Related Matters ....................................................................................................................... 65 10.0 LUANSHYA TECHNICAL BUSINESS COLLEGE: MINISTRY OF TECHNOLOGY AND SCIENCE ...................................................................................................................................... 66 10.1 Budget and Income .......................................................................................................................... 66 10.2 Accounting Irregularities ................................................................................................................. 67 10.3 Administrative Matters .................................................................................................................... 68 11.0 MONGU TRADES TRAINING INSTITUTE: MINISTRY OF TECHNOLOGY AND SCIENCE
 ............................................................................................................................................... 70 11.1 Lack of Management Board ............................................................................................................ 70 11.2 Budget and Income .......................................................................................................................... 71 11.3 Accounting Irregularities ................................................................................................................. 71 11.4 Administrative Matters .................................................................................................................... 73 11.5 Staff Related Matters ....................................................................................................................... 74 12.0 NATIONAL HEALTH INSURANCE MANAGEMENT AUTHORITY MINISTRY OF LABOUR AND SOCIAL SECURITY ................................................................................................. 75 12.1 Budget and Income .......................................................................................................................... 75 12.2 Weaknesses in the Management of Information and Communication Technology Systems .......... 76 ii 12.3 Operational Matters ......................................................................................................................... 79 12.4 Accounting Irregularities – Unretired Funds K1,176,386 ............................................................... 82 12.5 Staff Related Matters ....................................................................................................................... 83 13.0 NATIONAL HOUSING AUTHORITY: MINISTRY OF INFRASTRUCTURE HOUSING AND URBAN DEVELOPMENT ......................................................................................................... 86 13.1 Budget and Income
 .......................................................................................................................... 86 13.2 Failure to Submit Annual Reports and Audited Financial Statements ............................................ 87 13.3 Operational Matters ......................................................................................................................... 88 13.4 Administrative Issues-Asset Management ...................................................................................... 89 13.5 Staff Related Matters ....................................................................................................................... 92 14.0 NATIONAL SCIENCE AND TECHNOLOGY COUNCIL MINISTRY OF SCIENCE AND TECHNOLOGY .................................................................................................................................... 93 14.1 Governance ...................................................................................................................................... 93 14.2 Budget and Income .......................................................................................................................... 96 14.3 Operational Matters ......................................................................................................................... 96 14.4 Procurement Matters-Delayed Completion of Construction Works for Kasempa Centre of Excellence........................................................................................................................................ 99 14.5 Accounting Irregularities ............................................................................................................... 100 14.6 Staff Related Matters ..................................................................................................................... 100 15.0 NITROGEN CHEMICALS OF ZAMBIA: INDUSTRIAL DEVELOPMENT CORPORATION
 ................................................................................................................................. 102 15.1 Governance .................................................................................................................................... 102 15.2 Budget and Income ........................................................................................................................ 103 15.3 Information and Communication Technology Systems ................................................................ 104 15.4 Operational Matters ....................................................................................................................... 105 15.5 Procurement Matters-Contracts for Raw Materials ....................................................................... 109 15.6 Accounting Irregularities ............................................................................................................... 112 15.7 Failure to Remit Statutory Contributions ...................................................................................... 113 16.0 ROAD TRANSPORT AND SAFETY AGENCY: MINISTRY OF TRANSPORT AND LOGISTICS ......................................................................................................................................... 113 16.1 Budget and Income ........................................................................................................................ 114 16.2 Financial Analysis ......................................................................................................................... 115 16.3 Operational Matters – Wasteful Expenditure on Issuance of Road Service License .................... 116 16.4 Procurement Matters ..................................................................................................................... 117 16.5 Accounting Irregularities
 ............................................................................................................... 119 16.6 Weaknesses in the Management of Assets-Failure to Adhere to the Act on the Disposal of Motor Vehicles ......................................................................................................................................... 120 iii 16.7 Failure to Remit Withholding Tax to ZRA K230,533 and $16,064 .............................................. 121 17.0 TIMES PRINTPAK INDUSTRIAL DEVELOPMENT CORPORATION ......................... 121 17.1 Governance .................................................................................................................................... 122 17.2 Budget and Income ........................................................................................................................ 123 17.3 Financial Analysis ......................................................................................................................... 123 17.4 Operational Matters – Failure to reconcile Unsold Copies of Newspapers ................................... 125 17.5 Procurement Matters Failure to Avail Procurement Files ............................................................. 126 17.6 Accounting Irregularities-Wasteful Expenditure - Legal Fees ...................................................... 126 17.7 Administrative Issues .................................................................................................................... 127 17.8 Staff Related Matters – Irregular Payment of Education Allowance K 4,500 ............................ 128 18.0 TOBACCO BOARD OF ZAMBIA: MINISTRY OF AGRICULTURE ............................... 128 18.1 Governance-Irregular appointment of Interim Board K 284,098 .................................................. 128 18.2 Budget and Income ........................................................................................................................ 129 18.3
129 18.3 Financial Analysis ......................................................................................................................... 129 18.4 Operational Matters ....................................................................................................................... 131 18.5 Irregularities in the procurement of Stand Nos.
1962 & 1963 - Kabwe K1,861,716 ................... 135 18.6 Accounting irregularities ............................................................................................................... 137 18.7 Administrative Issues .................................................................................................................... 138 18.8 Staff Related Matters ..................................................................................................................... 140 19.0 ZAMBIA AIRPORTS CORPORATION LIMITED (ZACL) MINISTRY OF TRANSPORT AND LOGISTICS ................................................................................................................................ 141 19.1 Budget and Income ........................................................................................................................ 141 19.2 Financial Analysis ......................................................................................................................... 142 19.3 Operational Matters ....................................................................................................................... 146 19.4 Staff Matters .................................................................................................................................. 151 20.0 ZAMBIA DAILY MAIL LIMITED INDUSTRIAL DEVELOPMENT CORPORATION 152 20.1 Budget and Income ........................................................................................................................ 152 20.2 Information and Communications Technology Systems – Lack of Service Level Agreements ... 152 20.3 Financial Analysis ......................................................................................................................... 153 20.4 Operational Matters ....................................................................................................................... 156 20.5 Procurement Matters ..................................................................................................................... 157 20.6 Accounting Irregularities ............................................................................................................... 157 20.7 Staff Related Matters ..................................................................................................................... 158 21.0 ZAMBIA EDUCATIONAL PUBLISHING HOUSE: MINISTRY OF EDUCATION ....... 159 21.1 Governance .................................................................................................................................... 159 iv 21.2 Budget and Income ........................................................................................................................ 160 21.3 Financial Analysis ......................................................................................................................... 161 21.4 Operational Matters - Failure to Publish Material Using the Updated School Curriculum ........... 163 21.5 Accounting Irregularities ............................................................................................................... 163 21.6 Administrative Matters .................................................................................................................. 165 22.0 ZAMBIA MEDICINE REGULATORY AUTHORITY: MINISTRY OF HEALTH ......... 167 22.1 Budget and Income ........................................................................................................................ 167 22.2 Operational Matters ....................................................................................................................... 167 22.3 Asset Management – Failure to Secure Title Deed K 170,370,062 ............................................. 169 22.4 Failure to Fill Key Vacant Positions .............................................................................................. 170 23.0 ZAMBIA RAILWAYS LIMITED: INDUSTRIAL DEVELOPMENT CORPORATION .
170 23.1 Management .................................................................................................................................. 171 23.2 Budget and Income ........................................................................................................................ 172 23.3 Financial Analysis ......................................................................................................................... 173 23.4 Operational Matters ....................................................................................................................... 177 23.5 Procurement Matters ..................................................................................................................... 179 23.6 Administrative Issues .................................................................................................................... 181 23.7 Staff Related Matters ..................................................................................................................... 184 24.0 ZISC GENERAL INSURANCE LIMITED: INDUSTRIAL DEVELOPMENT CORPORATION ................................................................................................................................. 186 24.1 Management-Irregular Clause on the Calculation of Gratuity ...................................................... 186 24.2 Budget and Income ........................................................................................................................ 187 24.3 Weaknesses in Management of Information and Communication Technology System-Info ins Application System Management .................................................................................................. 187 24.4 Financial Analysis ......................................................................................................................... 189 24.5 Operational Matters ....................................................................................................................... 191 24.6 Procurement Matters-Contract for supply and delivery of Motor Cover Notes ............................ 194 24.7 Administrative Issues - Failure to Collect Outstanding Rental Income K2, 731,242 ................... 195 24.8 Asset Management - Failure to Submit an Asset Disposal Report to the Secretary to the Treasury K 343,000 ...................................................................................................................................... 195 24.9 Staff Related Matters ..................................................................................................................... 195 25.0 ZSIC LIFE LIMITED INDUSTRIAL DEVELOPMENT CORPORATION ....................... 196 25.1 Information and Communication Technology Systems ................................................................ 196 25.2 Budget and Income ........................................................................................................................ 200 25.3 Financial Analysis ......................................................................................................................... 200 25.4 Operational Matters ....................................................................................................................... 202 v PART III ............................................................................................................................................... 207 REPORT ON THE VERIFICATION TOUR OF LUSAKA, CENTRAL AND COPPERBELT PROVINCES ........................................................................................................................................ 207 PART IV ............................................................................................................................................... 230 26.0 SUBMISSION BY THE SECRETARY TO THE TREASURY ON THE RECOMMENDATIONS OF THE AUDITOR GENERAL ............................................................ 230 27.0 GENERAL OBSERVATIONS AND RECOMMENDATIONS ............................................. 231 28.0 CONCLUSION ........................................................................................................................... 234 vi REPORT OF THE COMMITTEE ON PARASTATAL BODIES ON THE REPORT OF THE AUDITOR GENERAL ON THE ACCOUNTS OF PARASTATAL BODIES AND OTHER STATUTORY INSTITUTIONS FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER, 2020 FOR THE FIRST SESSION OF THE THIRTEENTH NATIONAL ASSEMBLY a.
Composition of the Committee The Committee consisted of Mr Brian Kambita, MP (Chairperson); Ms Julien Nyemba, MP (Vice Chairperson); Mrs Mutinta C Mazoka, MP, Mr Anthony Kasandwe, MP; Mr Stephen Kampyongo, MP; Mr Mubita Anakoka, MP; Mr Vumango P Musumali, MP; Mr Joel Chibuye, MP; Mr Robert M Chabinga, MP; and Mr Herbert Mapani, MP.
The Honourable Madam Speaker National Assembly Parliament Buildings LUSAKA Madam The Committee has the honour to present its Report on the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2020 for the First Session of the Thirteenth National Assembly.

b.

Functions of the Committee The functions of the Committee are set out in Standing Order No.
197, of the National Assembly Standing Orders, 2021. c. Meetings of the Committee The Committee held twenty-four meetings to consider submissions on the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2020. d. Procedure adopted by the Committee With technical support from the Offices of the Auditor General, the Controller of Internal Audit and the Accountant General, the Committee considered both oral and written submissions from Controlling Officers and Chief Executive Officers of the twenty-two institutions that were cited in the audit report.
This Report contains the observations and recommendations of the Committee, including proposed remedial measures to correct identified irregularities.
The Report is in four parts: Part I deals with the Auditor General‟s comments and the responses from the Secretary to the Treasury; Part II captures the responses from Controlling Officers on the individual audit queries and the 1 Committee‟s observations and recommendations on the individual audit queries; and Part III deals with findings from the Committee‟s Local tour and Part IV contains the Committee‟s general observations and recommendations and the recommendations by the Secretary to the Treasury on how to enhance accountability in the management of public resources in statutory corporations and state owned enterprises.
PART 1 Auditor General’s Comments and Responses by the Secretary to the Treasury, Ministry of Finance 1.0 Auditor General’s Comments The Auditor General reported that the Audit Report had been produced in accordance with Article 250 of the Constitution of Zambia (Amendment) Act No.

2 of 2016, the Public Finance Act, No.

15 of 2004, the Public Finance Management Act No.

1 of 2018, the Public Audit Act, No.


13 of 1994 and the International Standards for Supreme Audit Institutions (ISSAIs).The Report contained irregularities on twenty-two parastatal bodies and other statutory institutions that were audited and remained with unresolved issues as at 31st December, 2020.

Six of these institutions were under the Industrial Development Corporation (IDC) which was equally cited in the Report.
The Report also included findings of the audits of the information communication technology (ICT) systems that some organisations had implemented in order to improve on their efficiency and effective service delivery.

The Auditor General also stated that to prepare the Audit Report, Controlling Officers and Chief Executive Officers of the affected institutions were availed draft paragraphs for comments and confirmations of the correctness of the facts presented.
Where management comments were received and varied materially with the draft paragraphs presented, amendments were made accordingly.

Submission by the Secretary to the Treasury The Secretary to the Treasury submitted that the audit of twenty-two parastatal bodies and other statutory institutions was appreciated.

He further submitted that the review of the ICT systems employed, to improve efficiency and effectiveness of service delivery to the public was important.
In this regard, the review of the ICT systems would create a platform for effective interventions to improve the systems by the respective Public Bodies.

The Secretary to the Treasury also submitted that in compliance with the provisions of the Public Finance Management Act No.

1 of 2018, the Treasury would undertake a detailed analysis on each public body cited in the report and make recommendations to the appropriate authorities to apply necessary punitive measures provided therein.
2 2.0 Scope and Methodology of the Audit The Auditor General informed the Committee that the Report was as a result of audits of selected parastatal bodies and other statutory institutions for the Financial Year ended 31st December, 2020.

The Auditor General further submitted that although the Report related to the Financial Year ended 31st December 2020, it included audits covering the financial years 2016, 2017, 2018, and 2019 for the institutions that had not been audited for those years.
In addition, the audits covered two categories of institutions, namely those whose financial statements were audited and certified by the Auditor General and those whose financial statements were audited and certified by private auditors in line with appropriate pieces of legislation and their financial statements were further reviewed by the Auditor General.
The Auditor General further added that it was necessary that such accounts were reviewed, and the result of such reviews were reported by the Auditor General in compliance with relevant legislation.

The Auditor General also submitted that the report was as a result of programmes of test checks, inspection and examination of financial, procurement, projects and other records maintained by public officers entrusted with handling public resources.
The audit programmes were designed to give reasonable assurance of financial management in the audited institutions.

Submission by the Secretary to Treasury The Secretary to the Treasury submitted that the scope of audit used by the Auditor General was appreciated.
The test checks and review of audited accounts of the years ending 31st December, 20202 of the twenty-two entities revealed key weaknesses in the management of public bodies such as questionable payments, failure to follow procurement procedures, failure to collect funds and wasteful expenditure among other issues.
The Secretary to the Treasury further submitted that the interaction of the Office of the Auditor General with the Chief Executives through their Controlling Officers was encouraging as it upheld values of good corporate governance in the management of the Board by providing checks and balances in the management of public resources.
The Secretary to the Treasury also submitted that his Office was grateful to the Office of the Auditor General for availing vital information in the audit report, which would in turn assist Parliament in its oversight role over the management of public resources by the Executive.
3.0 Internal Controls With regard to internal controls, the Auditor General made specific mention on the following: non-preparation of financial statements, non-adherence to procurement procedures, wasteful expenditure and poor financial performance among other issues, by the respective institutions.

The Auditor General further highlighted that these were clear indicators of internal control weaknesses in the institutions.
3 Submission by the Secretary to Treasury The Secretary to the Treasury submitted he had taken note of the internal control lapses which led to non-preparation of financial statements, wasteful expenditure and poor financial performance.

To address these weaknesses comprehensively, the Ministry of Finance and National Planning would engage the respective Controlling bodies to review the internal control environment of the public bodies to enhance their internal controls.
PART II CONSIDERATION OF SUBMISSIONS FROM CONTROLLING OFFICERS AND CHIEF EXECUTIVE OFFICERS The Committee considered submissions from Controlling Officers and Chief Executive Officers in charge of the institutions cited in the Report of the Auditor General, as set out below.
4.0 BANGWEULU WATER TRANSPORT: MINISTRY OF TRANSPORT AND LOGISTICS An examination of financial and other records for the Financial Years Ended 31stDecember, 2019 and 2020, maintained at Bangweulu Water Transport in Samfya District revealed various irregularities to which the Controlling Officer submitted as set out below.
4.1 Budget and Income The Controlling Officer in his submission acknowledged, as correct, the observation by the Auditor General the negative variance of K24,837,511 against a budget of K29,274,410.

He further submitted that Bangweulu Water Transport Board (BWTB) failed to generate the budgeted for funds because its income generating activities were put on hold in 2016.

This was to facilitate for renovations and expansion of infrastructure at the harbor which, however were not completed in time.
He further informed the Committee that, at the time, BWTB had only one vessel, which was not operational after it had developed a weakened base.

The Committee also learnt that in October 2019, the Government handed over a new modern vessel to BWTB.

120 seater water bus which became operational in the last quarter of 2019.As a result, BWTB was able to pay salaries from the realised profits, dismantle outstanding statutory obligations and also invest in rehabilitation of the guest house.
Furthermore, the Committee heard that the Government through Zambia Postal Services Corporation (ZAMPOST) was sourcing funds to repair the vessel called “Zambia-China Friendship” that had a weak base.
The Controlling Officer further submitted that following the expiration of the contract, the Ministry of Transport and Logistics had also informed the Ministry of Infrastructure, Housing and Urban Development of the pending completion of the harbour infrastructure at the Water Board and that the works stood at 55 per cent complete at the time of reporting.

He further submitted that BWTB was confident that upon completion of the works, it would be able to meet its revenue target.
4 Committee’s Observations and Recommendations The Committee notes, with concern, the lack of capacity by the Board to generate revenue.

The Committee recommends that capacity should be built to enable the entity generate revenue.

The Committee further recommends that the Controlling Officer ensures that the entity adheres to the provisions of section 20 (a) and (b) of the Public Management Act No.
1 of 2018 which provides for the need to ensure that revenue is properly forecast, taking into account other binding constraints within the macroeconomic framework.

The Committee observes that the contract to rehabilitate the harbour expired and therefore, recommends that the Controlling Officer expedites the process of engaging the Ministry of Infrastructure, Housing and Urban Development to advertise the works for retendering.
The Committee will await a progress report on the rehabilitation of the harbour.

4.2 Operational Matters – Non-operational Cargo Vessel The Controlling Officer informed the Committee that the Water Board was created to service the Zambian citizens living on the Islands of Lake Bangweulu, both as passengers and transportation of their cargo.

However, when the vessel developed a weak base, the Ministry of Transport and Logistics and the Board did not have capacity to repair it.
In addition, its holding costs were unsustainable.

In this regard, the Ministry opted to transfer the vessel to the Zambia Postal Services Corporation, which was running a similar vessel called the “Post Boat” on Lake Bangweulu and was in a position to repair the vessel.

This was in spite of the fact that ZAMPOST did not raise any direct revenue benefits for the Board, apart from saving on costs.
The Committee also learnt that the vessel had since been handed over to the Zambia Postal Services Corporation and plans were underway to have the vessel rehabilitated and repaired.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee observes, with concern that the Ministry failed to source funds to repair the vessel.
The Committee notes that the vessel has since been transferred and therefore, urges the Auditor General to verify if the transfer was done within the provisions of the law and if the vessel is now operational.

The Committee will await a progress report on the matter.
4.3 Procurement Matters - Failure to Follow Procurement Procedures The Controlling Officer submitted that the observation by the Auditor General, that the entity procured spare parts and other services for the passenger vessel without obtaining three quotations was correct.

He informed the Committee that servicing of marine equipment, was specialised in nature.
He further submitted that a search for conventional marine services within Luapula Province proved futile, hence the Board settled for the nearest company which was domiciled in Chingola on the Copperbelt Province.

Documentary evidence was available for verification.

5 Committee’s Observations and Recommendations The Committee urges the Controlling Officer to ensure that the entity always adheres to the provisions of the Public Procurement Act No.

8 of 2020.
8 of 2020.

The Committee further urges the Auditor General to verify the facts in the submission, after which, if there are no further irregularities, the matter should be closed.

4.4 Accounting Irregularities 4.4.1 Use of Private Printed Receipt Books The Controlling Officer submitted that the observation by the Auditor General was correct and regrettable.
He further submitted that following the handover of the 120-seater water bus by the Government to the Board, these were not enough Government General Receipts to sustain the volume of transactions on a daily basis.

As a result, the Institution started issuing private printed receipts to passengers which, on a round trip, would be summed up and receipted on a General receipt.
He added that this was meant to be a short-term measure before authority was granted by the Secretary to Treasury for low value receipts which were more economical, given the nature and volume of the transactions.

The Committee also learnt that the Institution failed to notice that the private printed receipts had the same serial numbers and the entity continued to receipt fares using the same receipts.

This was a negligent act by the Accounting Officer.
As such, the Ministry resolved not to confirm the officer who was at the time in acting capacity.

The Ministry had since transferred the finance function of the Institution to the Office of the District Commissioner, until such a time that a qualified accounting officer was employed.

The Committee also heard that the number of receipt books printed by the supplier was well documented in the register of accountable documents and the revenues collected thereof, were correctly accounted for.
The Ministry was engaging the Treasury on the low value receipts, which were more economical and indications were that the Strong Room at the Ministry of Finance, was concluding on the general-purpose low value Government receipt.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes the Controlling Officer‟s response and finds it unacceptable that it had to take the auditors to point out the query for the Board to act.
This is because the request to print low value receipt books, to the Ministry of Finance and National Planning, was only done in March, 2021 after the audit exercise.

The Committee is disappointed to note that the Board only wrote to the Treasury after it had already started using the private receipts.

In this regard, the Committee recommends that, in line with Financial Regulation No.
107 of 2020, the Controlling Officer should mete out disciplinary action against the supervisors who failed to execute their duties in line with the provisions of the Public Finance Management Act No.

1of 2018.

The Committee resolves to keep the matter open and will await a progress report on the matter.

6 4.4.2 Lack of a Safe The Controlling Officer informed the Committee that the observation by the Auditor General was correct.
He further submitted that the procurement of safes was a preserve of the Treasury, as provided for in Financial Regulation Number 161 of 2020.

In this regard, the Ministry had been engaging the Secretary to the Treasury since 2018.

The Committee also learnt that during the period, the Ministry had only managed to secure one safe which was being used at Headquarters and efforts to secure more safes for institutions under the Ministry, including Bangweulu Water Transport Board, had continued.
He further informed the Committee that notwithstanding, in the absence of the safe, Management was using secured cabinets to secure public funds, articles and accountable documents for the Institution.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee is disappointed to note that in as much as the procurement of safes is the preserve of the Treasury, the Board only requested for the “safe” in 2021 after the audit exercise.
The Committee detests the reactive manner in which the Management of the Board was handling administrative issues.

The Committee recommends that the Controlling Officer engages the Treasury with respect to acquisition of the “safes.” The Committee further urges the Treasury to ensure that the process to procure and distribute “safes” is undertaken timely.

The Committee will await a progress report on the matter.
4.4.3 Wasteful Expenditure K 4,200 The Controlling Officer submitted that the observation by the Auditor General was correct and regrettable.

He further submitted that the query arose due to the issuance of cheques on an insufficiently funded account due to negligence by the officer who was acting as accountant.
He further informed the Committee that the officer was surcharged with the amount of K 4,200 and that the accounting function of the Institution had been transferred to the Office of the District Commissioner until such a time when a qualified accounting officer was employed.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee observes, with concern, the failure to adhere to accounting procedures.
The Committee is of the considered view that there was poor supervision of the officer in question.

The Committee notes the measure taken to recover the funds.

However, the Committee recommends that the Controlling Officer institutes disciplinary action against the supervisors who failed to ensure that financial procedures were adhered to.

The Committee further recommends that the Treasury ensures that a qualified accounting officer is deployed at the Board.
The Committee is also averse to the reactive manner in which the Ministry and the Board have been managing the entity.

The Committee resolves to await a progress report on the recruitment of a qualified accounting officer and withdrawal of the accounting function from the Office of the District Commissioner.
7 4.4.4 Irregular Use of Accountable Imprest K 116,778 The Controlling Officer submitted that it was regrettable that the Board used accountable imprest to purchase goods and services, whose costs could not be ascertained at the time.

He further submitted that the query arose due to the unwillingness by suppliers to be paid by cheque.
The Committee learnt that to mitigate the risk, the Ministry had directed the Board to be instructing the Bank to pay suppliers in cash after completion of normal procurement procedures.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee reiterates its observation on the unacceptable reactive management approach exhibited by both the Ministry and the Board, considering that the documentary evidence availed to the Committee showed that action was only taken after the audit.

The Committee further finds the Controlling Officer‟s submission inadmissible, as it did not have to take the auditors for the Board to consider paying the suppliers through the Bank.
The Committee is of the considered view that the lapse was deliberate and therefore, recommends that disciplinary action should be instituted against the supervisors who failed to execute their duty.

The Committee will await a progress report on the matter.

4.5 Staff Related Matters 4.5.1 Irregular payments (i) Recruitment of Officers K 138, 593 The Controlling Officer submitted that the observation of the Auditor General was noted and correct.
He further submitted that the new officers cited had been working for the Board as casual workers for over thirty-two months before they were introduced on the payroll.

Further, the introduction of the officers on the payroll was necessitated by the provisions of the Employment Act No.

3 of 2019, which prohibited casualisation.

Furthermore, the officers were necessary following the operationalising of the Water Bus vessel that required a higher workforce.
He also submitted that it was regrettable that the Management of the Board did not seek prior authority from the Permanent Secretary in the Ministry of Transport and Logistics, as per the guidance that had been given by the Director - Department of Maritime and Inland Waterways (DMIW), in a minute dated 25th October, 2007.

He further informed the Committee that the matter would be resolved administratively.
Committee’s Observations and Recommendations The Committee is disappointed to note the casual manner in which the Management of the Board was handling administrative issues.

While acknowledging that the Employment Act No.

3 of 2019 banned casualisation and that following the operationalisation of the Water Bus vessel, the Board required extra workforce, the Committee condemns the blatant disregard of the guidance to seek prior authority.
The Committee reiterates that the Act does not exempt anyone from adhering to the appropriate recruitment procedures and authority.

In this regard, the Committee recommends 8 that the Controlling Officer institutes action and ensures that the funds are recovered from the people who flouted the employment procedures in accordance with section 49 of the Public Finance Management Act No.

1 of 2018 and Financial Regulation No.

57 of 2020.

The Committee will await a progress report on the matter.
(ii) Acting Allowance K 79,958 The Controlling Officer submitted that Management noted the observation of the Auditor General and submitted that it was an omission with respect to oversight on the part of Management.

The Committee learnt that following the appointment of the then Manager for the Board as District Commissioner-Samfya, the Accountant, as he then was appointed to act as Manager and as such his assistant started acting in his position of Accountant.
The Controlling Officer further submitted that Bangweulu Water Board Management wrote to the Ministry suggesting that the officer be considered to act as an accountant.

However, the acting appointment could not be authorised by the Ministry because the officer was not registered with the Zambia Institute of Chartered Accountants, in line with the Accountants Act No.

13 of 2008.
13 of 2008.

He further apprised the Committee that the Ministry could not engage a registered accountant due to revenue constraints alluded to above.

However, to improve accountability at the Institution, Management had requested the Office of the District Commissioner to provide accounting services to the Board.
Committee’s Observations and Recommendations The Committee is disappointed to note that the Board tends to blatantly disregard the need to seek authority form the Ministry before undertaking any decisions, as prescribed by the established regulations and procedures.

The Committee, therefore, agrees with the Auditor General that the acting allowance should not have been paid, as the Ministry did not authorise the officer to act.
In this regard, the Committee directs the Controlling Officer to act and ensure that the funds are recovered in accordance with section 49 of the Public Finance Management Act No.

1 of 2018 and Financial Regulation No.

57 of 2020.

The Committee will await a progress report on the matter 4.5.2 Failure to Deduct NHIMA Contributions K773,659 The Controlling Officer informed the Committee that Management had noted the Auditor General‟s observation.
He further submitted that during the period under review, the Institution had not yet registered with the National Health Insurance Authority (NHIMA) in accordance with the requirements of the National Health Insurance Act No.

2 of 2018 and therefore, could not remit the funds without the registration.

He further submitted that during the period, the Board had financial difficulties and that it was an oversight on the part of Management not to have registered with NHIMA.
The Committee learnt that the entity had since been registered and that remittances to NHIMA were up to date.

Documentary evidence was available for verification.

9 Committee’s Observations and Recommendations The Committee observes, with consternation, the laxity on the part of Management to ensure that the provisions of the National Health Insurance Act No.

2 of 2018 were adhered to.


The Committee finds the Controlling Officer‟s submission inadmissible and recommends that disciplinary action against the Management of the Board be immediately instituted in line with section 12(2)(a) of the Public Finance Management Act No.

1 of 2018, for their laxity so as to deter such a laissez-faire management approach, going forward.

The Committee will await a progress report on the matter.
4.5.3 Failure to Remit Pay as You Earn (PAYE) K 36, 540 The Controlling Officer submitted that the observation by the Auditor General was correct.

He further submitted that it was an omission on the part of Management not to deduct Pay as You Earn (PAYE) and that this was regrettable.
He further re-echoed the fact that during the period under review, the Board was not generating any income from 2016 and, in this regard, the grant from Government was not adequate to meet operational needs and staff emoluments.

Consequently, the Board failed to remit PAYE as cited.
The Committee also learnt that following the handover of the of the Water Bus to the Institution and generation of some revenue, the Institution had devised a payment plan to dismantle the outstanding arrears of K36, 540.00 and so far amounts totaling K10, 386.79 had since been paid, leaving a balance of K 26, 153.21.

He further submitted that the Board was hopeful that the outstanding arrears would be cleared by the second quarter of 2022.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee notes, with concern, the failure by the Board to settle statutory obligations and strongly urges the Controlling Officer to ensure that the outstanding balances are cleared without further delay.

The Committee further recommends that the Controlling Officer ensures that Management adheres to the provisions of section 12(2)(a) of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee urges the Controlling Officer to submit, for verification, all documents in support of the submission and will await an update on the payment of the outstanding statutory obligations.

4.5.4 Under Deduction of PAYE The Controlling Officer submitted that the observation of the Auditor General was noted and regrettable.
To redress the observation, Management had started recovering the monies from one of the officers whose PAYEs were under deducted effective October, 2021, while the other under deduction would be recovered from the benefits of the officer who was deceased.

Documentary evidence was available for verification.
10 Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification after which, if there are no further irregularities, the matter should be closed.

4.6 Asset Management 4.6.1 Missing Television Set Lucheleng’ anga Passenger Vessel The Controlling Officer submitted that the matter of the missing television set was reported to the Police.
However, Management decided to deal with the matter administratively so that funds to procure a new TV set could be recovered from the security officer who was on duty and was subsequently charged with negligence.

Furthermore, Management decided to withdraw the case owing to the length of time it takes to deal with cases reported to the police.

The value of the TV set was ascertained to be K4,000.00, which amount was being recovered from the security officer effective October 2021.
Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes the submission and directs the Controlling Officer to caution Management against abrogating the provisions of section 41 (10) of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee further directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, after which if there are no further irregularities, the matter should be closed.

4.6.2 Failure to Insure Boats, Dredger and Passenger Vessel (Luchelenanga) K 15,000,000 The Controlling Officer submitted that the observations by the Auditor General were noted.
He further informed the Committee that the Ministry of Infrastructure and Urban Development insured all the twenty-five Government dredgers at the total sum of K1,716,075.75 with ZISC General Insurance and the insurance cover would expire on 18th June, 2022.The Ministry of Transport and Logistics insured the three passenger vessels with Madison Insurance, at the cost of K 535,435.00 and the cover would expire in March, 2022.
He further submitted that Management failed to avail the insurance documents during the audit as the documents were domiciled at another ministry while the audit was conducted at a different ministry.

Documentary evidence was available for verifications.

Committee’s Observations and Recommendations The Committee notes the response and urges the Office of the Auditor General to take more care when verifying documents in future.
The Committee further directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification after which if there are no further irregularities on the query, the matter should be closed.

11 4.7 Infrastructure Development -Stalled Project – Construction and Rehabilitation of Maritime Infrastructure The Controlling Officer submitted that the observations of the Auditor General were noted.
He further submitted that the failure to complete the project was due to Government‟s failure to settle Interim Payment Certificates (IPCs) as they fell due.

He further submitted that the Government did not make any advance payment to the contractor.

As such, they used their own resources.

Despite the use of their own resources, Government delayed to settle two IPCs of K709,684.69 (IPC No.

1) and K536,811.09 (IPC No.

2).


Furthermore, due to delays in settlement of IPCs, the Contractor demobilised, and by the time the 2nd IPC payment was fully paid, the contract had expired.

In that regard, the total percentage of works done was 55 per cent which fell short of the Presidential directive of only prioritising projects that were above 80 per cent complete, hence the failure to proceed with the project.
He further informed the Committee that the completion of the project had been brought to the attention of the Ministry of Infrastructure, Housing and Urban Development for consideration.

The status of the project was as outlined in the Table 4.1 below.
Table 4.1 Status of stalled projects S/n Project Details Date signed Contract Price (ZMK) 2,292,893.34 Amount paid to date 1,246,496.25 IPC Amounts in completed works (1): K709,684.69 Project status Project is at 55 % completion IPC (2): K536,811.09 K1,246,496.25 1,246,496.25 1.0 Construction :19 8th January, 2015.

Contract Period weeks and rehabilitation of maritime infrastructure in Samfya District Works Done Completion date: 17th June, 2015 extended to 20th January, 2016.
Balance of on works the Contract K1,046,397.09 Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to pursue the Ministry of Infrastructure, Housing and Urban Development; and the Treasury with respect to timely funding of the construction works.

The Committee will await an update on the matter.


12 4.8 Loss of Revenue - Incomplete Rest House and Restaurant K 337,740 The Controlling Officer informed the Committee that the observations of the Auditor General were noted and regrettable.

He further submitted that the Ministry undertook to rehabilitate the Rest House and Restaurant considering that the dilapidated state they were in was not guaranteeing revenue generation in the near future.
It was, however, unfortunate that funding for the project could not be released in time to facilitate the completion, as already alluded to.

Committee’s Observations and Recommendations The Committee notes, with concern, that the Board lost revenue due to the poor state of the infrastructure in question.

The Committee urges the Treasury to expeditiously intervene in the matter to ensure that the infrastructure is rehabilitated timeously.

The Committee will await an update on the matter.


5.0 BANK OF ZAMBIA An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020, maintained at Bank of Zambia Head Office, Regional Office in Ndola and sub chests in Southern, North Western and Western Provinces revealed various irregularities, to which the Controlling Officer responded as set out below.
5.1 Governance-Onerous Conditions of Service The Governor, Bank of Zambia submitted that the observation by the Auditor General that a security of tenure clause existed in the contracts of the Governor and Deputy Governors, of the Bank of Zambia was correct.

He further apprised the Committee that the Bank of Zambia was a member of the Committee of Central Bank Governors (CCBG) in Sothern African Development Community (SADC).
He further submitted that the Committee was created with support of the SADC Ministers responsible for national financial matters and was approved by SADC in 1995.

He further informed the Committee that SADC (CCBG), established by the Finance and Investment Protocol (FIP), had been mandated to implement the monetary and financial integration agenda of SADC.

He further apprised the Committee that one of the benchmarks of the FIP, was to harmonise the legal and operational frameworks of SADC Central Banks.
In addition, the CCBG resolved to develop the SADC Central Bank Model Law based on three pillars: (i) independence, (ii) accountability, and (iii) transparency.
The Committee also learnt that SADC Member central banks were expected to work towards domesticating the provisions of the Central Bank Model Law into their national central bank laws as they reviewed and updated them; and that the Model Law promoted the adoption of general principles to facilitate the operational independence of SADC central banks.

The Model Law promoted the creation of clear standards of accountability and transparency in the legal and operational frameworks of SADC central banks.
13 The Governor further added that the Security of Tenure clause, which was born at the formulation of the SADC Central Bank Model Law, was designed to facilitate the maintenance of autonomy of the Central Banks in relation to the tenure of Governors, where it was generally observed that the manner of terminations of some appointments stood as a challenge to the concept of central bank operational autonomy.
The Committee also heard that in light of the high turnover of Governors experienced by the Bank of Zambia, totalling fifteen Governors since independence, the inclusion of the security of tenure clause in the contracts for Governors and Deputy Governors was an interim measure agreed by the parties, while the legislative process of domesticating the provisions of the SADC Model Law remained un-concluded.
The Governor also informed the Committee that, the process of enacting a revised Bank of Zambia law anchored on the principles espoused in the SADC Central Bank Model Law had reached an advanced stage as the Bill was expected to be tabled before Parliament in the first quarter of 2022.
The Bill provided for provisions for exit formalities for the Governor and Deputy Governors, which when enacted, would do away with the security of tenure clause that existed in the contracts for the Governor and Deputy Governors.
The Committee also heard that as an interim measure to cure the concern raised by the Auditor General, the clause for the security of tenure in the Governor‟s contract signed in January, 2022, had since been revised to read as follows“ In the event of premature termination of the Contract under Clause (xiv) and (i) , the Governor will be entitled to be paid the full emoluments for the un-served period of the Contract provided that this clause shall not be valid if the premature termination under Clause (xiv) (i) is on the grounds of gross misconduct or incompetence by the Governor, as established by the President after due process.
He further submitted that with regard to the overriding period between the time his contract was prematurely terminated, the Government had not yet paid out the full emoluments and that talks were being held on how best to resolve the issue in the best interest of the nation.
Committee’s Observations and Recommendations The Committee notes the response and agrees with the Governor with regard to the need for a security of tenure of office for the Governor, as espoused in the Constitution of Zambia (Amendment) Act No.

2 of 2016.

While appreciating that the Bank of Zambia ascribes to the SADC model law, the Committee observes, with concern that this has not been domesticated in as much as some of the principles such as ensuring autonomy are already being practiced by the Bank.
The Committee takes note that a Bill has been presented to Parliament to harmonise the provisions of the Constitution and the provisions of the SADC protocol.

In this regard, the Committee is hopeful that proper exit mechanisms have been incorporated, with respect to the performance of the Governor in the new bill.
The Committee further recommends that the Treasury should ensure that as the Ministry of Finance and National Planning resolves the aspect of paying the Governor the full emoluments to which he is entitled, the people of Zambia should not be disadvantaged, considering that the contract was expected to run till December, 2022, a period within which the contract was terminated and the Governor was reappointed.
The Committee directs the Governor to submit to the Auditor General, all documents in support of 14 the submission for verification after which, if there are no irregularities on the query, the matter should be closed.
5.2 Financial Analysis 5.2.1 Statements of Profit and Loss and Other Comprehensive Income (i) Increased Income Due to Weakening of the Kwacha The Governor, Bank of Zambia submitted that it had been established that the total comprehensive income, less foreign exchange movements for 2018 was miscalculated.
This was due to the net unrealised foreign exchange gains for 2018 of K1,298,749,000, which were shown as net unrealised foreign exchange losses, instead of gains as presented in the audited financial statement and therefore resulting in the miscalculation of the total net foreign exchange movement of K672,661.

This resulted in the reported total comprehensive income less net foreign exchange movement of K4,156,746,000 for 2018, which was overstated.
The Table below shows a correction of the computation of the net foreign exchange movement for the year 2018, which was presented at K1,924,837,000 as submitted by the Controlling Officer.

In light of the correction, the total comprehensive income, less net foreign exchange movement, had therefore, marginally increased from K1,559,248,000 in 2018 to K1,780,509,000 in 2020.
Although the comprehensive income increased (net of foreign exchange gains), profit maximisation was not a primary objective of the Bank.
Table 5.1: Net Income in Foreign Exchange Movements foreign exchange Details Total comprehensive income Net realised gains(losses) Net unrealised foreign exchange gains(losses) Net foreign exchange movement Total comprehensive income less net foreign exchange movement 2020 (K’000) 6,989,108 6,727,203 2019 (K’000) 2,943,889 3,303,584 2018 (K’000) 3,484,085 626,088 (1,518,604) (1,410,366) 1,298,749 5,208,599 1,780,509 1,893,218 1,050,671 1,924,837 1,559,248 Committee’s Observations and Recommendations The Committee is concerned that a continued deprecation of the kwacha has a negative effect on the economy and the operations of small and medium enterprises.
While the Committee appreciates that profit, maximisation is not a primary objective of the Bank, the Committee urges the Bank to ensure that measures are put in place to hedge the kwacha from extreme deprecation, going forward.

The Committee further directs that all documents in support of the submission should be submitted to the Auditor General for verification, after which, if there are no further irregularities on the query, the matter should be closed but kept in view for future audits.
15 (ii) Decrease in Interest Income-Foreign Currency Investments and Deposits The Governor, Bank of Zambia submitted that the observation by the Auditor General that the Central Bank‟s Interest income from foreign currency investments and deposits decreased by K84,603,000 from K285,469,000 recorded in 2018 to K200,866,000 in 2020 was correct.
He further submitted that the decrease in interest income on foreign currency investments and deposits was on account of the decline in the level of international reserves during the period under review and decline in the global interest rates.

Interest income had been on the decline since the 2008 financial crisis, which permanently altered the global economy and the financial system.
The Governor further apprised the Committee that the level of international reserves was dependent on foreign exchange (forex) inflows.

The level of inflows was, in turn, largely influenced by both the volume and price of copper exports.

It was also influenced by the level of forex outflows with debt service and market support, including imports of strategic commodities, such as, petroleum products and agricultural inputs, being the major outflows.
He further submitted that the servicing of external debt was an important aspect of the Bank of Zambia‟s role as banker to the Government.

These debt service payments were therefore determined by the Government.

It was also worth noting that the Bank recorded net purchases of US$346 million and US$515.3 million in 2018 and 2019, respectively.

However, in 2020 the Bank recorded net sales of US$345.6 million.
The Bank‟s Investments were managed in line with the Bank of Zambia International Reserves Policy (IRP), which stipulated the following reserves management objectives in order of priority: (a) preserve capital of the international reserves portfolio; (b) ensure liquidity in order to meet various uses for which reserves are held; and (c) earn a reasonable return subject to meeting capital preservation and liquidity objectives as stated above.
The Bank would continue to prioritise capital preservation and liquidity objectives before a return objective, as stated above.

Furthermore, Management had put in place strategies for the augmentation of international reserves, which included receipt of mining taxes in foreign currency and purchase of gold in Kwacha from local mines.
He further informed the Committee that the Bank was concerned that the reserves had plummeted, considering that the pride of the central bank was having high international reserves.

He further added that Zambia‟s economy was reach with resources but the challenge had been poor management.

Committee’s Observations and Recommendations The Committee observes, with concern, that the decrease in interest income-foreign currency investments and deposits has a negative impact on the international reserves.
In agreeing with the Auditor General, the Committee urges the Treasury to ensure that stringent mechanisms, not limited to redirecting earnings from the mines, minimising of forex exchange outflows, export of 16 power and diversification of the economy, are put in place to enhance preservation of capital of the international reserve‟s portfolio, which in turn assures Government‟s ability to respond to emergencies.
The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which, the matter should be closed if there are no other irregularities on the same query.

The Committee recommends that the matter should be kept in view during future audits.
5.2.2 Statements of Financial Position The Governor, Bank of Zambia submitted that an analysis of the Statement of the Financial Position, revealed the following: (i) Decrease in Domestic Cash in Hand The Governor, Bank of Zambia submitted that the observation by the Auditor General that domestic cash in hand had declined by 32 per cent from K4,700,000 in 2018 to K3,196,000 in 2020 was correct.
He further informed the Committee that the domestic cash in hand related to the teller cash balances that were held at the end of each banking day.

The teller cash balances represented the cash deposits received from Government (mostly Zambia Revenue Authority) and cash held to cover the Bank of Zambia (BoZ) staff transactions (withdraws and deposits).
The Bank‟s cash requirements to manage short term obligations were determined, as shown in the Statement of Cash flows, by the Cash and Cash Equivalents for the Bank.
Committee’s Observations and Recommendations The Committee resolves to close the matter 5.3 Operational Matters 5.3.1 Weaknesses in Management of the International Reserves A review of the financial statements and other documents, revealed the following: (i) Diminishing Balances on the International Reserves The Governor, Bank of Zambia submitted that the observation by the Auditor General that the International Reserves decreased from US$$1,569,204,050 in 2018 to US$1,203,422,070 in 2020 representing a decline of 23 per cent as shown in Table 3, below was correct.
17 Table5.3: Diminishing balances in International Reserves He further submitted that the debt service payments from 2018 to 2020 amounted to US$2,959.9 million.

This contributed heavily to the decline in the international reserves position to US$1,203.4 million in 2020 from US$1,569.2 million in 2018.

Against this background, the Bank had embarked on some initiatives to enhance foreign reserves.
These were: (a) Mining Tax Payments in US Dollar In 2018, discussions with the Bank resulted in the Government, through the Zambia Revenue Authority (ZRA), directing all mining firms to be paying mineral royalty taxes (MRT) in US dollars.

In 2019, US$285.4 million was paid in mineral royalty tax.

Further, in June 2020, another directive to have all the other mining tax obligations paid in US dollars was issued.

Total mining tax receipts in 2020 stood at US$489.8 million.
The Bank received US$1.1 billion in tax receipts in 2021.

These measures were helping the Bank to meet some of the liquidity challenges; (b) Gold Procurement in local currency In December, 2020, the Bank contracted two mining firms, namely, Kansanshi Mining Plc (KMP) and Zambia Gold Company Limited (ZGCL) to supply locally mined gold and be paid in local currency.

By 2021, about US$36.8 million worth of refined gold had been purchased and paid for in Kwacha from KMP.
This gold was included in the gross international reserves position.

With respect to ZGCL, US$6.1 million worth of un-refined bars consisting of gold had been purchased.

Once this had been refined to monetary gold standard, it would be included in the official international reserves.

The Committee also learnt that there was no timeline with regard to when the gold would be refined, as this depended on the accredited refiners.
The Committee also learnt that the value of the gold would only be ascertained after it had been refined.

He further submitted that the strategy to receive mineral loyalty in dollar dominated currency had helped to reduce volatility in the exchange rate and helped to avert the influence on the exchange rate, which was being occasioned by private players.
Committee’s Observations and Recommendations The Committee is of the considered view that the Bank should have purchased already refined gold as opposed to un-refined gold ore.
It is the Committee‟s considered view that the cost of refining and the price of the gold, which will be determined by the market, may cause a loss in 18 FolioDescription2020 US$ Equivalent2019 US$ Equivalent2018 US$ Equivalent(A)Bank & Cash Balance 347,300,426.35 408,369,700.04 366,346,981.48 (B)Investments391,586,448.81 397,650,192.59 455,986,061.91 (C)Fixed Term Deposit442,929,053.45 622,293,595.32 726,666,165.81 Sub Total1,181,815,928.61 1,428,313,487.95 1,548,999,209.19 (D)Tied Balances21,606,142.25 21,447,248.01 20,204,841.67 Total Available Reserves1,203,422,070.86 1,449,760,735.96 1,569,204,050.86 value.
While appreciating that gold has a high value, the Committee expresses concern that the Bank may end up having an impaired asset, which may not help to increase the reserves.

The Committee recommends that the Bank should formulate a “Gold Policy” considering that the bank has decided to make gold part of its reserves.

The Committee will await a progress report on the refining of the gold ore and the formulation of a gold policy.
(ii) Failure to Maintain International Reserves of at least 6 months of Import Cover The Governor submitted that the observation by the Auditor General that during the period under review, the international reserves were maintained at below the targeted six months of import cover, as shown in Table 5.4 was correct.
Table 5.4: International Reserves Vs Import Cover He further informed the Committee that achieving the six-month import cover, set in the 2016- 2019 Strategic Plan, entailed either a significant increase in international reserves or a steady growth; and even a decline in imports, or a combination of both as these were the two parameters used in the computation of the import cover.
During the period under review, the actual months of import cover were consistently below the six-month import cover target, as illustrated in Chart 1.

He further submitted that at the end of 2021 the months of import cover were 4.5 months, equivalent to US$2.8 billion.

He further submitted that this could have been lower had it not been for the Debt Service Suspension Initiative (DSSI) by the G20.
19 Reserve Balance Target Import Cover01/07/2021 USD $ Million Decmber 20 USD $ Million Decmber 19 USD $ Million Decmber 18 USD $ Million Gross International Reserve1,600 1,200 1,450 1,570 Gross International Reserve (exclusive of SDR)1,420 1,020 1,200 1,330 Gross International Reserves(excl SDR and FX Stats)1,080 720 1,050 1,180 Import Cover (Months)32.92.42.11.8Statutory Reserves for Commercial Banks (FX Stats)340300210153Special Drawing Right180180190240Total SDR + FX Stats520480400393 Chart 1: Months of Import Cover and Target, 2011-2020 8.0 7.0 6.0 5.0 4.0 3.0 2.0 2011 2012 2013 2014 2015 2016 Months of Import Cover 2017 Target 2018 2019 2020 The Committee also learnt that accounting for this underperformance, was largely the significant increase in external debt service by Government.
This was occasioned by the substantial rise in the stock of foreign debt due mainly to the need to finance public infrastructure projects.

As a result, external debt service grew from US$0.6 billion in 2016 to US$1.2 billion in 2019.

This resulted in a substantial decline in international reserves to US$1.5 billion from US$2.4 billion over the same period.
Efforts by the Bank of Zambia to shore up international reserves through net market purchases of US$2.2 billion were not sufficient to offset debt service obligations.

The Committee further learnt that the decline in debt service in 2020 was primarily due to the Debt Service Suspension Initiative (DSSI) by the G20, which Zambia was able to access.

The primary aim of DSSI was to help eligible countries to stay afloat in view of the COVID-19 shock.
In the absence of this, debt service for Zambia would have been higher by the extent of the foreign arrears, Although imports were supposed to be largely financed from earnings from exports and other external inflows, there were instances when inflows had not been sufficient.

In this case, the Bank had to support the market through the sale of foreign exchange for critical imports, such as- petroleum products and agricultural inputs.
The Bank of Zambia had an ambitious plan to increase reserves in the medium-term in line with the targets under the international and regional economic cooperation programmes.

(AMCP) and the Southern Africa Development Community The Committee was further informed that the Bank was part of the Africa Monetary Cooperation (SADC) Programme macroeconomic convergence (MEC) programme that required parties to meet and maintain a level of reserves equivalent to at least six months of import cover.
Sadly, Zambia and other countries, had failed to reach the benchmark set that Zambia would soon be peer-reviewed by Botswana.

In this regard, the payment of all mining taxes directly in US dollar through the Bank of Zambia since June, 2020 was one strategy for reserves build-up.

This was in addition to purchasing locally produced gold, which was not only aimed at achieving portfolio diversification, but also augmented reserves.
The Bank would continue with its conventional method of purchasing foreign exchange from the market, conditions permitting, while ensuring stability in the exchange rate.

It was expected that 20 Government‟s commitment to fiscal consolidation would help in resolving the macroeconomic imbalances and contribute to a robust reserves accumulation programme and in turn raise the import cover.
He further submitted that the Bank was working in collaboration with Government ministries on how to find a lasting solution to the challenge of the reserves and also the impact of the Covid-19.

Committee’s Observations and Recommendations The Committee notes the response and resolves to await a progress report with regard to the peer-review and the report which will propose strategies on the issue of declining reserves that affect import cover.
(iii) Increase in Debt Servicing Payments as a Percentage of International Reserves The Governor submitted that he agreed with the Auditor General‟s observation that during the period under review, there was an increase in Debt Service, as percentage of International Reserves, of 5 per cent from 48 per cent in 2018 to 53 per cent in 2020 as shown in Table 5.8 below Table 5.5: Debt Service payments as a percentage of International Reserves No Description Available Total Reserves External Debt Service Principle Interest Total Debt Service Debt Service as a % of International reserves 2020 US$ Million Equivalent (Actual) 1,203 2019 US$ Million Equivalent 1,450 2018 US$ Million Equivalent 1,569 309 331 640 53 629 463 1,092 75 319 441 760 48 He further informed the Committee that the Debt service payments from 2018 to 2020 amounted to US$2,959.9 million.
This contributed heavily to the decline in the international reserves position, to US$1,203.4 million in 2020 from US$1,569.2 million in 2018.

To enhance reserves and minimise the identified risks from being actualised, the Bank undertook the following strategies to augment international reserves and effectively contribute to capital preservation: (a) Mining tax payments in US Dollar.
In 2018, as alluded to earlier, the Government through the Zambia Revenue Authority (ZRA), directed all mining firms to be paying all taxes in US dollars.

(b) Gold purchases in local currency.

In December, 2020, the Bank contracted two mining firms, namely Kansanshi Mining Plc (KMP) and Zambia Gold Company Limited 21 (ZGCL) to supply locally-mined gold and be paid in Kwacha in order to augment international reserves.
The Committee also learnt that the mining companies were allowed to sell their gold to whoever they pleased, as there was no surrender arrangement in place.

The Committee was also apprised that the information with regard to the taxes was domiciled at Zambia Revenue Authority and the Bank only relied on the information provided.
However, the Committee heard that it was a mammoth task for the Bank to get information with regard to forex in the market and any other relevant information that would be used for planning purposes following the repeal and replacement of the Exchange Control Act.

Committee’s Observations and Recommendations The Committee observes, with consternation the difficulty for the Central Bank to access relevant information from the market due to the absence of an enabling legal framework.
In this regard the Committee recommends that the Treasury should ensure that a legal framework which shall make it obligatory for financial institutions to provide financial and economic information to the Central Bank, as and when need arises, is put in place.

The Committee further urges the Treasury to ensure that measures are put in place to avert the shocks that are prevalent in the mining sector and eventually have a negative impact on the reserves and the foreign exchange.
The Committee will await a progress report on the matter.

(iv) Failure to Meet International Reserve Benchmarks – Strategic Asset Allocation The Governor informed the Committee that tranche limits, as prescribed in the Strategic Asset Allocation (SAA) for the foreign reserves portfolio, were breached on a number of occasions during the period, 2018-2020.
These breaches related to tranche size limits where foreign reserves in the working capital tranche exceeded the maximum limit, whilst funds in the liquidity tranche were below the minimum limit, as shown in the Tables below.
Table 5.6: Liquidity risk benchmarks 2018-2019 No Reserve Balance 1 Working 2 3 capital Tranche Liquidity capital Tranche Investment Tranche Target 15% +/-10% December 2019 28% December 2018 12.20% Variance 2019 3% Variance 2018 75% +/-10% 42% 58.60% -23% -6.4% 10% +/-10% 30% 29.20% 10% 9.2% 22 Table 5.7: Liquidity risk benchmarks 2020-2021 No Reserve Balance Target 31st July 2021 31st Decemb er 2020 30.4% Varianc e as at July Varianc e 2020 6.9% 0.4% capital 2 1 Working Tranche Liquidity Tranche Investment Tranche 3 capital 20% +/-10% 36.9% 70% +/-10% 51.3% 53.70% -8.7% -6.3% 10% +/-10% 11.8% 15.9% He further submitted that due to elevated external debt service levels and instability in the foreign exchange market, payment requirements to meet external debt service and facilitate sales of foreign exchange by the Bank, especially in 2020, heightened.
This raised the funds required in the working capital tranche and therefore, the Bank‟s priority was to ensure that sufficient funds were available to meet these obligations.

As a result, funds in the liquidity tranche were used to constantly beef up the working capital tranche.

This led to the breach of the SAA with the working capital tranche held above the upper limit, whilst the liquidity tranche was below the lower limit.
To correct the misnomer, the Bank put in place a framework that guided the management of reserves and this was reflected in the International Reserves Management Policy and in the supplementary SAA.

An SAA was a disciplined way of investment that spelt out a long-term view of allocating reserve assets across different dimensions such as currency, asset classes and geographical distribution.
Among the important features of an SAA, was the subdivision of the reserves portfolio into different tranches - namely the working capital, liquidity and investment tranches.

Each tranche was designed to meet a specific purpose as outlined below.

The working capital tranche was intended to meet immediate payments, such as foreign exchange interventions and external debt service payments.
This tranche comprised cash and short-term deposits of up-to one month, whereas the liquidity tranche was held to cushion the working capital tranche.

If funds in the working capital tranche were inadequate to meet immediate payments, reserves from the liquidity tranche were used to beef up the working capital tranche.

On the other hand, if balances in the working capital tranche exceeded the expected payments, funds could be moved out of the working capital tranche to the liquidity tranche.
The investment tranche provided an additional cushion to the working capital tranche.

The Committee further learnt that the breakdown of reserves into tranches was aimed at managing liquidity risk that would arise if the Bank of Zambia failed to convert assets into cash quickly, to meet foreign currency payments, the primary objective for which foreign reserves were held.

Minimum and maximum thresholds for each tranche were also prescribed in the SAA.
Compliance to these limits was monitored on a monthly basis and any misalignments were required to be corrected within three days.

However, in implementing these activities, limit constraints on either one of the tranches would inevitably be exceeded from time to time, 23 especially when international reserve levels were relatively low.

This was due to the fact that payment requirements could deviate from expectations that were prevailing at the time the SAA was being developed.
Where it became practically impossible to stay within the prescribed tranche sizes, the International Reserves Management Policy and Guidelines, allowed for such tactical deviations from the SAA and required that these circumstances be explained to the International Reserves Management Committee, periodically.

The observed breaches were accordingly reported in line with this requirement.

This provision was meant to ensure that ability to meet foreign currency payments was maintained.
In order to meet the necessary constraints contained in the SAA guidelines, it was vital that enough reserves were consistently accumulated, relative to the various calls on the reserves, especially debt service obligations.

He further submitted that during the period under review, there was a disjoint in the collaboration among the stakeholders with respect to projection of cash flows and also the debt that had been acquired and this led to the extreme deviations in the tranches.
Committee’s Observations and Recommendations The Committee observes, with concern, that there was disjoint among the stakeholders in the acquisition of credit, which led to extreme deviations in the tranches and exerted extreme pressure, both on the Treasury and the Bank.

The Committee recommends that the Treasury enhances collaboration mechanisms.

The Committee resolves to keep the matter open and will await a progress report on meeting the International Reserve Benchmarks – Strategic Asset Allocation.
5.3.2 Management of Sub Chest Operations (i) Failure to adhere to prescribed minimum cash holding for the sub-chest The Governor submitted that the observation by Auditor General was noted and correct, as shown in the Table 5.8 below.

Table 5.8: Minimum cash holding He further submitted that the Bank had set minimum holdings for Sub-chests to act as a trigger for replenishment.
However, incidences of getting below this minimum holding did occur, though rarely, due to inordinate demand that would arise from Commercial Banks within certain geographical areas stemming from some unexpected customer requests.
The demand could rise unexpectedly in a few Sub-chests at the same time, thereby causing timing differences between 24 S/NDateSub-chestMinimum holding (25%)Actual Holding Variance131.07.2021Livingstone62,500,00023,635,500(38,864,500) 231.08.2021Livingstone62,500,0003,113,500(59,386,500) 331.07.2021Choma62,500,00044,483,500(18,016,500) 431.08.2021Choma62,500,0007,645,000(54,855,000) consignment runs.
Prioritising of restocking in such instances was done to ensure there was no incident where the Bank was unable to meet customer demands.

He further apprised the Committee that the Bank monitored the balances of cash at Sub-chests daily and any shortfall that would be below the reordering level was immediately rectified by taking more cash to the Sub-chests with low levels.
In addition, during the period the audit was being undertaken, the country experienced a very high demand for currency for activities pertaining to huge social cash transfers, elections, and agricultural payments.

The Bank had to ensure that all the payments were met on time by redistributing currency from cash surplus Sub- chests to cash deficient Sub-chests.

He further submitted that cash management was a dynamic process.
The Bank took measures to ensure that currency was provided to the public even if it meant the balance falling temporarily below the minimum level in some Sub-chests that were not facing high demand.

Committee’s Observations and Recommendations The Committee notes the response and recommends that the matter should be closed but should be kept in view, for future audits.
6.0 COPPERBELT UNIVERSITY: MINISTRY OF EDUCATION An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020, maintained at the Copperbelt University (CBU), revealed various irregularities to which the Controlling Officer responded as set out below.

6.1 Governance – Failure to Prepare Annual Reports The Controlling Officer submitted that the observation by the Auditor General regarding failure to prepare Annual Reports was noted and acknowledged.
She further submitted that the University experienced a system failure or crash on the ICT Network on 28th June, 2017.

The cause of the crash was an internal ransom ware attack from a malicious email received by a member of staff.

The malware subsequently attacked the servers.

The said crash resulted in backlogs and delays to produce audited financial statements for 2020 accounting year.
She further submitted that in January 2018, Management engaged Asyst International (South Africa), as the service provider to re-create the finance system database and Management went on an aggressive programme to have financial statements prepared and audited.

In this regard the 2017 and 2018 audited financial statements were approved by Council on Wednesday, 31st March, 2021.

The 2019 financial statements were approved by the Council on Wednesday 6th October, 2021.
Furthermore, the financial Statements for 2020 had been audited and were being reviewed by Partners at Grant Thornton.

The Controlling Officer also informed the Committee that the University had established offset back-up systems, invested in database recovery systems and also multi-layer defence to deny 25 intruders into the university‟s network and that they also had an antivirus (Kaspersky) which was going to run for three years.
She further submitted that all these activities were informed by the ICT policy which incorporated the backup policy, business continuity plan and disaster recovery plan.

Committee’s Observations and Recommendations The Committee observes, with concern, that in the absence of Annual Reports, it is difficult to undertake a systematic assessment of the University‟s performance.
Furthermore, the Committee observes that this is in contravention of section 72 (1) and (3) of the Public Finance Management Act No.

1 of 2018.

While noting the strides made, the Committee is disappointed to note that the same query was raised in the Report of the Auditor General for the Financial Year Ended 31st December, 2017 and the same response given as to why the Annual Reports were not prepared.
The Committee therefore, recommends that the Controlling Officer should take disciplinary action in accordance with section 72(3) of the Public Finance Management Act No.

1 of 2018.

Furthermore, the Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the matter.


6.2 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the University had a deficit of K45, 134,000, against a budget of K918,395,000 during the period under review was correct.

She further informed the Committee that the Institution had low income levels during the period under review due to inadequate funding from the Treasury on Grants and Infrastructure.
The University received a total of K438 million and K435 million in 2018 and 2019.

Furthermore, the University had an adverse variance for two years in a row which affected the implementation of certain undertakings such as statutory obligations not being paid, terminal benefits not being honoured and hampered infrastructure development.
The Committee further learnt that commencing 2020, the Institution had been budgeting for its activities, based on Government Grants, in line with approved budget ceilings as guided by the Ministry of Education.

The Committee also learnt that the University received income less than what was budgeted for and that the Government did not consistently fund the entity in line with the new financing strategy which assured a yearly increase in the grants.
Committee’s Observations and Recommendations The Committee observes, with concern, that failure to adhere to section 20 of the Public Finance Management Act No.

1 of 2018 has a negative impact on the service delivery by the University.

The Committee urges the Treasury to ensure that the University is adequately funded.

The Committee resolves to keep the matter open and will await a progress report on the funding of the University.
26 6.3 Failure to Account for Revenue from Bed Spaces The Controlling Officer informed the Committee that the observation by the Auditor General regarding failure to account for revenue from bed spaces was noted and acknowledged.
She further apprised the Committee that in a bid to address the challenges of student accommodation where only 1,996 bed spaces were available in 2017, against a student population of 10,788, Management had decided to allocate housing units of members of staff to students as hostels.

As at 30th September, 2021, a total of twenty-five low cost houses were converted into 242 bed spaces.

However, only 226 bed spaces had been utilised as at the time of reporting.
It was expected that a total of K 1,098, 196 was expected to be generated.

The Controlling Officer further submitted that the University had adopted a prudence concept as one of the principles for budget preparation.

The houses in question were converted into hostels in a phased manner.

This was dependent on the housing units falling vacant, rehabilitations to the units done and bunk beds and other furniture made available to the housing units.

The process was done over a period of time.


Therefore, income from the converted houses was not included in the budget for the years 2018, 2019 and 2020.

The Committee learnt that in the 2020 budget, only 2,106 bed spaces were included.

The difference, therefore, related to the additional bed spaces created by converting housing units into habitable bed spaces.

During the period under review, out of the 242 bed spaces created, only 226 bed spaces were utilised.
Furthermore, the Committee was informed that the University‟s main sources of income were Government Grants, student fees, donations and other income generating ventures.

Student fees comprised tuition fees, accommodation and other fees.

The breakdown of recorded amounts in respect of accommodation in the years 2018 to 2020 was as shown in the Table below.
Breakdown of amounts in respect of accommodation The Controlling Officer assured the Committee that the Institution would continue making appropriate disclosures of income generated from accommodation in the financial statements as required by the International Accounting Standards (IASs).

Committee’s Observations and Recommendations The Committee observes, with concern, the lack of disclosure of information by the University in abrogation of section 11(1)(p) of the Public Finance Management Act No.
1 of 2018.
While noting the response, the Committee is disappointed that the officers failed to avail the relevant 27 Bed SpacesRateAmountBed SpacesRateAmountBed SpacesRateAmountNew Hotels1926,050 1,161,600 1926,050 1,161,600 1926,050 1,161,600 Old Hostels1,8044,538 8,186,552 1,8044,538 8,186,552 1,9144,538 8,685,732 Housing Units04,538 - 04,538 - 2264,538 1,025,588 KMU2587,050 1,818,900 6757,050 4,758,750 3277,050 2,305,350 Total2,25411,167,052 2,67114,106,902 2,65913,178,270 201820192020Bed Space Group information to the auditors and in this regard, the Committee recommends that the Controlling Officer institutes disciplinary measures against all officers responsible so as to deter others from taking the audit exercise lightly.
The Committee further urges the Controlling Officer to take note of Financial Regulation No.

4 (1c) with respect to collection of revenue due to the statutory body.

The Committee will await an update on the matter.

6.4 Financial Analysis - Statement of Comprehensive Income - Operating Deficits The Controlling Officer submitted that the observation by the Auditor General that the University had operating deficits amounting to K132,653,000 and K171,542,000 in 2018 and 2019 respectively was correct.
She further informed the Committee that the University had continued to operate in deficit over the years due to inadequate funding to sustain its operations.
The Controlling Officer submitted that the University had put in measures that would supplement the revenue deficits such as:- (i) increasing student enrolment, over the years, from 4,903 in 2007 to 10,056 in 2020 with the view to increase revenue by opening satellite campuses in Ndola, Lusaka, Mansa, Solwezi, Kasama and Mpika to capture students who found it difficult to enrol in Kitwe due to their work schedules; (ii) embarking on numerous income generating ventures in order to increase its revenue base; namely, CBU-ICT Business and Innovation Centre in Lusaka, computer manufacturing and assembly plant in Kamfinsa, manganese mine in Mwense, and the Northern Circuit Project, among others.
The Controlling Officer further submitted that the matter of inadequate funding was also being pursued through the New Financing Strategy.

The University, through the Ministry of Education, had engaged the Secretary to the Treasury for funds to facilitate settlement of some long- standing statutory obligations that had resulted in accrual of penalties and interest.
The Controlling Officer also informed the Committee that the University failed to make a profit in 2020 but the deficit had reduced from K 171 million to K138 million.

The University was hopeful that with the reduction in the gratuity rates for staff and also the programme to make most of the staff on permanent and pensionable, as opposed to contracts, the University would make a saving of over K 20 million per annum.
Furthermore, the University Management was confident that even though most of the special purpose vehicles meant to increase income were in their infancy, they would eventually break even and bail out the University.

Committee’s Observations and Recommendations The Committee is saddened to note that the same query was raised in the Report of the Auditor General for the Financial Year Ended 31st December, 2017.
The Committee observes, with concern that the same strategies cited by the Controlling Officer, were submitted to the Committee in 2019 as a solution to the challenges.

However, the status quo speaks otherwise.

The Committee recalls that it had recommended that the Ministry of Education should request for a change in the modality of funding, from monthly and term funding to a semester funding 28 mode.
The Committee therefore directs the Controlling Officer to provide an update on the outstanding statutory obligations and the Committee will await a progress report on the various matters raised.

6.5 Operational Matters 6.5.1 Results entered by NULL Users The Controlling Officer submitted that the observation by the Auditor General was noted and regrettable.
She further informed the Committee that the Student Information System (OPUS Reloaded), was internally developed by Software Developers at CBU in 2013 and became operational in 2014.

She further informed the Committee that the system had undergone various upgrades to ensure that it performed according to the expectations.

In the initial development, there was a bug that failed to identify users with no user name specified (NULL users).
To resolve the issue, the bug was identified and corrected, including records that were affected.

She further informed the Committee that the Institution had re-enforced routine checks and clean-ups involving internal system audits so as to ensure adherence to expected system standards.

Going forward, the University had procured various licenses to fight against malware.
The Controlling Officer further informed the Committee that contrary to public perception, the software developed by the University was not inferior in comparison to outsourced software.

She further submitted that the process to change results on the data base had rigorous steps and equally had an audit trial to keep track of any malicious activity.
She further informed the Committee that the University had a case in which a lecturer had attempted to change results and the system was able to identify this anomaly.

Committee’s Observations and Recommendations The Committee observes, with concern and disappointment that a similar query was cited in the Report of the Auditor General for the Financial Year Ended 31st December, 2017 and that a similar response, system failure was given as the cause of the query.
The Committee is of the considered view that there seems to be a deliberate tampering of the student results data base.

The Committee finds it unacceptable that the same query should recur in a similar fashion.

While noting the intervention undertaken to resolve the query, the Committee directs the Controlling Officer to institute disciplinary action against all officers responsible for the query and all substantive supervisors.
The Committee further directs the Secretary to the Treasury to ensure that internal systems are strengthened in accordance with section 15 (1)(aiii) of the Public Finance Management Act No.

1 of 2018.

The Committee will await an update on the matter.

6.5.2 Final Mark Entered Without Original Mark The Controlling Officer informed the Committee that the observation by the Auditor General, regarding the final mark entered without an original mark was noted and acknowledged.
She further submitted that the single final mark arose after appeals and approvals for result entries.

The entries were done by Heads of Department using the moderation window which had no 29 provision for entering Continuous Assessment marks (as initial mark), resulting into Heads of Departments entering a single-entry mark.

The Controlling Officer submitted that the single entry also occurred when the course in question was a project course as it had no Continuous Assessment.
From the queried entries, examples of project courses included: Studio Projects, Built Environment and Land Information Systems.

These were structured as projects which had single final mark.

She further submitted that the moderation and appeal processes were normal university processes that happened under existing standard operating procedures involving an approval process.
In addition, she informed the Committee that the Institution had put in measures for effective management of results for students as set out below.

i.

The Deputy Registrar – Academic had been given viewing rights to check on how entries were being made.

ii.

Re-programming of the system was being looked into in order for the system to be rejecting single entry of results.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and if there are no irregularities on the query, the matter should be closed but kept in view during future audits.
6.6 Administrative Matters 6.6.1 Failure to Secure Title Deeds The Controlling Officer submitted that the observation by the Auditor General, regarding failure to secure Title Deeds was noted and acknowledged.

She further submitted that the delays in acquiring title deeds for the various parcels of land had been due to the lengthy processes of conveyance.
Management had been in contact with the various Councils as well as the Ministry of Lands and Natural Resources as per the documentary evidence submitted for verification.

The Controlling Officer further updated the Committee with respect to the status of all the concerned parcels of land as shown below.

i.

Plot No.

38643/M Hillcrest The land housed the School of Medicine Campus.
The University had engaged the Ndola City Council to expedite the processing of the required documents for submission to Ministry of Lands and Natural Resources.

30 ii.

Plot 428 (6 Choma Avenue) The process of acquiring title deeds for the house along Choma Avenue stalled because of a protracted legal battle.

The litigation on the property extended over ten years with the property having two title deeds, with two different owners.
Subsequently, the matter was decided by the courts of law, in favour of the Copperbelt University.

The court‟s decision allowed the University to subsequently secure certificate of title No.

250689 dated 14th October, 2013.

However, following these events, a witness and an interested person in the court case, approached Registrar of Lands and Deeds and also obtained a certificate of title No.

1003259 dated 18th May, 2016 for the same property.
Upon being aware of the action by the interested person, the University wrote to the Registrar of Lands and Deeds office informing him about the earlier judgment and certificate of title No.

250689 and requested for cancelation of the title No.

1003259 dated 18th May, 2016.

This request was pending at the Registrar of Lands and Deeds.

Follow ups were being made.

iii.

Sub division A of Farm No.


2457 – CBU Kamfinsa Land The process to acquire title deeds, for the Kamfinsa land, stalled due to non-payment of property transfer tax by the vendor.

However, after submission of the valuation report, to Zambia Revenue Authority, as part of the documentation to be submitted by the vendor, the process had been resuscitated and was on course.

iv.
iv.

F/SOLWE/4011963 – CBU Solwezi Land The University had since paid the statutory fees relating to the invitation to treat and awaited the completion of the process by Ministry of Lands and Natural Resources v. F/CHIENG/4044968 - CBU Chiengi Land The University had since paid the statutory fees relating to the invitation to treat and awaited the completion of the process by Ministry of Lands and Natural Resources vi.

Kawambwa Land Processing of title deeds had commenced.
The University had paid in full the conversion of land fees (plot premium) to Kawambwa Town Council and awaited completion of the process by the Local Authority.

vii.

Mpulungu Land The University had paid to Mpulungu Town Council the prescribed inspection fees and awaited the completion of the process by the Local Authority.

31 viii.

Chapel Building Plot The University conducted a search at Lands Office in Ndola and the plot was not available in the lands registry system.
Lands Office was yet to complete the manual check.

The University had continued to actively pursue the matter.

ix.

Kapasa Makasa Land The property in question housed a Police Academy, under the then Ministry of Home Affairs, and was later transferred to Ministry of Education.

Ownership was still vested in the Government at the time the Copperbelt University was managing the institution.
Committee’s Observations and Recommendations The Committee notes the response with regard to the various parcels of land that do not have title deeds.

The Committee observes, with dismay, the occurrences with respect to plot 428 (6 Choma Avenue).

The Committee recommends that the matter be reported to the investigative agencies and a forensic audit should be conducted.
The Committee further recommends that the Controlling Officer ensures that the parcels of land are secured with title deeds in accordance with section 41 (4) of the Public Finance Management Act No.

1 of 2018.

The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await a progress report on the matter.
6.6.2 Poor Maintenance of University Assets The Controlling Officer submitted that the observation by the Auditor General regarding poor maintenance of university assets was noted and acknowledged.

She further apprised the Committee that the Copperbelt University was built in the 1970s and most of the campus buildings were old and required high maintenance.

Further, wear and tear had been accelerated mainly on account of increase in student population from the time the buildings were constructed.
The Institution had operated with limited financial resources, which were not sufficient to cover extensive maintenance works.

The Committee also learnt that Management had undertaken maintenance works on some of the properties cited using funds that were raised through other income generating ventures.

Refurbishment and repair works had been carried out notably in areas to do with plumbing, painting and other remedial works involving bricklaying and electrical.
The process was an ongoing activity and more resources would be set aside so as to ensure that more corrective and planned maintenance works were carried out.
As at 31stDecember, 2021, a number of works had been done such as painting works at the student houses with significant progress, plumbing works were conducted at the houses and hostels and a full maintenance of house number B24 comprising carpentry works, metal works, plumbing and tiling, was undertaken and completed by 15th December, 2021 and allocated to a member of staff who moved into the house on 17 December, 2021.
32 She further informed the Committee that the University formulated maintenance plans on a yearly basis specifying which buildings would be refurbished in a specific year.

The Controlling Officer submitted that the University had a long-term plan in which the main focus was to remodel the buildings into a modern architectural set up, as buildings were old and hence most of the refurbishments were not yielding the desired results.
Committee’s Observations and Recommendations While noting the response from the Controlling Officer, the Committee is of the considered view that the University has a reactive approach in the management of assets as most of the works were done after the audit.

The Committee urges the Controlling Officer to direct Management to adhere to the provisions of section 41 of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee further directs the Controlling Officer to submit to the Auditor General, all documents in support of the submission for verification.

The Committee resolves to keep the matter open.

6.6.3 Construction of the Entrance Canopy, Doors and Windows for Gate 1 K420,180 The Controlling Officer submitted that the observation by the Auditor General regarding delayed completion of works on the entrance Canopy, Doors and Windows for Gate 1was noted and acknowledged.
She further submitted that the contractor abandoned the site.

The University successfully paid for 68 per cent of the works completed after withholding a 5 per cent of the contract sum as retention.

She further informed the Committee that following the contractor‟s failure to raise funds for the completion of the project, the University had terminated the contract through its procurement Committee for failure by the contractor to execute the project.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee is disappointed to note that the University only acted in 2021, after the audit exercise.

This shows a management style which is reactive and therefore, unacceptable.

The Committee recommends that the Controlling Officer cautions Management against a laissez-faire management style and to direct Management to adhere to the provisions of section 76 of the Public Procurement Act No.

8 of 2020.
8 of 2020.

The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will await a progress report on the completion of the project.

6.6.4 Failure to Collect Rentals K1,140,419 The Controlling Officer submitted that the observation by the Auditor General regarding failure to collect rentals was noted and acknowledged.
She further informed the Committee that most of the tenants occupying trading areas within the university had been having challenges to sustain their businesses, especially in view of the premature closures that had happened at the Institution during the period under review.

The situation was worsened further with the outbreak of Covid- 19 when the Institution was closed for over six months, with the tenants incurring fixed costs with limited business opportunities.
The Controlling Officer submitted that tenants were 33 requested to settle their arrears before the renewal of lease agreements, commencing 1st January, 2022.

As a result, out of K1.1 million, a total of K403,707.68 was received, as at 31 January, 2022, leaving a balance of K 736,711.32 as per the documentary evidence which was availed for verification.
The Committee was further apprised that other tenants had been engaged with options of recovering the debt as follows: a. ZAMPOST Following the demand, by CBU that payment of arrears be made before renewal of lease agreements commencing 1st January, 2022, ZAMPOST wrote in the affirmative with a payment plan on how to liquidate the arrears and documentary evidence was availed for verification b. Varinite Investments A dispute arose due over a misunderstanding on costs incurred by the tenant prior to commencement of operations.
The vendor rehabilitated the former cafeteria with the view to convert it into a modern restaurant.

Their understanding was that such rehabilitation costs were supposed to be written off from future rentals when that was not part of the agreement.

The University had since written requesting that payment of arrears be made before renewal of lease agreements commencing 1st January, 2022 and documentary evidence was availed for verification.
c. Oasis Supermarket (Storeroom) The supermarket was initially allocated as a storeroom by the University, but was eventually withdrawn and offered to the Dean of Students for institutional use, which later leased it to Oasis Supermarket.

The invoices had been reversed for the period not occupied by the tenant, resulting in a balance of K118, 297.
Although the tenant ceased operations at the campus, a commitment had been made to clear the amount within the first quarter of 2022 and documentary evidence was availed for verification.

The Controlling Officer further added that out of the thirteen tenants, only one would not renew their lease agreement.

Committee’s Observations and Recommendations The Committee notes the response by the Controlling Officer.
The Committee further observes that failure to collect rentals, points to an aspect of a Controlling Officer or Controlling body or an office holder‟s failure to perform financial duties assigned, which amounts to financial misconduct.

The Committee urges the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and resolves to await a progress report on the settlement of the outstanding rental arrears.
34 6.7 Staff Related Matters 6.7.1 Failure to Remit Statutory Contributions K1.386 billion The Controlling Officer submitted that the observation by the Auditor General regarding failure to remit statutory contributions was noted and acknowledged.

She further submitted that the lower revenue base had resulted in the Institution‟s failure to service statutory obligations and as a result the statutory obligations were ever rising to unattainable levels.
The total revenue did not cover Gross Personal Emoluments.

She further submitted that the National Pensions Scheme Authority arrears, which arose prior to 2014, were ring fenced following a court consent judgment.

Management resolved to be remitting part of the arrears together with monthly obligations.

A payment plan was agreed upon between the University and NAPSA on liquidating the principal amounts.
However, the plan could not be honoured in full in 2020, because the Institution closed due to the surge in the Covid-19 pandemic cases.

The University re-engaged NAPSA to discuss the challenges being faced by the Institution and both parties agreed to resume the payment plan.

As at 31st January, 2021, the Institution had paid a total of K3.1 million of the arrears, in addition to monthly obligations as per the documentary evidence which was availed for verification.
The Controlling Officer further informed the Committee that Management planned to liquidate the outstanding amount of K12.1 million owed to NAPSA in seventeen monthly instalments.

The University was paying a monthly sum of K1.7 million for employer and employee contributions.

Management had committed to paying a minimum of K700,000.00, from its internally generated and Government allocated funds, in a bid to completely liquidate the outstanding debt.
With regard to the debt owed to the Zambia Revenue Authority (ZRA) for PAYE, Management, through the work of the Technical Committee, requested for a bail out of this debt as it could not be financed from the grants and tuition fees generated by the University as per the documents availed for verification.

Furthermore, the University had engaged the Government to fund the Gross Personal Emoluments budget.
The University would also continue to raise additional financial resources to sustain all its obligations.

Committee’s Observations and Recommendations The Committee notes, with concern, the lack of funding to the Institution with regard to Gross Personal Emoluments and urges the Treasury to intervene on the matter.
The Committee urges the Controlling Officer to ensure that liquidity problems are addressed by increasing the capacity of the University to generate revenue and should provide a turnaround strategy.

6.7.2 Outstanding Gratuity Payments K 167,530,036 The Controlling Officer submitted that the observation by the Auditor General, regarding outstanding gratuity payments was noted and acknowledged.
She further submitted that the lower revenue base had resulted in the Institution‟s failure to service gratuity payments for the period under review.

Furthermore, despite obtaining a loan facility in 2017 to pay off retirement 35 gratuity benefits, an additional thirty-six members of staff retired, while an additional twenty had died, thereby putting pressure on the already stretched resource envelope.
The Controlling Officer further submitted that Management had made a deliberate policy to allocate resources to retirement benefits.

In 2018, Management with approval of the University Council commenced migrating staff that were on contract to permanent and pensionable conditions of service upon expiry of contracts.

The decision had resulted in reduced contract gratuity payments in the short to medium term.
In addition, in November, 2020, Management with the approval from the University Council amended the gratuity rates for contract staff from 50 per cent for local staff and 35 per cent for expatriate staff to 25 per cent.

This measure had resulted in annual savings of gratuity accruals of over Twenty Million Kwacha (K20 million).

Additionally, all new contracts effective November, 2020, were being managed by an Independent Pension Fund Manager.
The Controlling Officer further submitted that Management had also continued engaging the stakeholder unions to migrate all in-house pension schemes for permanent and pensionable staff to Defined Contribution Pension Scheme.

The Unions had been reluctant to conclude on this matter as they had been requesting for an immediate payoff of all accrued rights on current in- house schemes, which the Institution could not afford from the resources at the time.
Discussions were on-going and Management believes that this matter would be resolved and concluded with the Unions soon.

Committee’s Observations and Recommendations The Committee observes, with concern that the salaries to revenue ratios were too high and likely to choke the liquidity of the Institution.

The Committee recommends that the Controlling Officer ensures that the Institution curbs the expenses on salaries the salaries.
The Committee notes the strides made and resolves to await an update on discussions with the Unions and the payment of outstanding gratuities.

7.0 INDUSTRIAL DEVELOPMENT CORPORATION An examination of financial and other records for the Financial Years ended 31st December, 2018, 2019 and 2020, for the Industrial and Development Corporation (IDC), revealed various irregularities to which the Controlling Officer responded as set out below.
7.1 Governance – Lack of Prescribed Tenure of Office for Board Members The Acting Group Chief Executive Officer, who is the Controlling Officer of the Industrial Development Corporation (IDC), submitted that the observation by the Auditor General that the Board members who served on the IDC Board, had no prescribed tenure of office as both the Articles of Association and the Board Charter did not prescribe the tenure for members who served on the IDC Board was correct.
He further submitted that the President of the Republic of Zambia was the appointing authority.

Considering that the tenure of office for the directors, was not prescribed, the President had discretion to determine which Directors were to have prescribed tenure.

In the same vein, the appointments could be revoked at any time.
He further apprised 36 the Committee that the discretionary authority was vested in the Minister of Finance and National Planning who, was the Government‟s shareholder through Chapter 349 (Minister of Finance) Incorporations Act of 1965.

The Committee also learnt that the IDC Board was dissolved in December, 2021.

Committee’s Observations and Recommendations The Committee observes with great reservation the lack of a prescriptive tenure of office for the Board members of the IDC.
The Committee further observes with concern, that the President is the appointing authority for the Board Members, and is the one who determines their tenure to serve on the Board.
While taking cognisance of the recommendations in its Report for the Second Session of the Twelfth National Assembly, to have the President as Chairperson for the IDC, as well as a Political Champion to drive the country`s State Owned Enterprises (SOEs) reform process in the initial stage of operations for the IDC, the Committee strongly recommends that the structure of the IDC Board should be reviewed and that the President should not continue to chair the IDC Board as this compromises, the extent to which Parliament can offer oversight on IDC.
7.2 Budget and Income The Controlling Officer submitted that the observations by the Auditor General that the IDC recorded a negative variance of K541,210,184 against its budgeted revenue of K1,111,523,184 anticipated from dividends; disposal of assets; interest on short term investments; and shareholder loans; and rental income was correct.
He further submitted that the variance between budgeted revenue and actual revenue was as a result of unrealised revenues from planned divestitures; dividends; and management fees.

He further submitted that in determining budget numbers, the Corporation made assumptions on the level of dividends to be declared, based on unaudited numbers of its subsidiaries and investees for the third quarter.
The Controlling Officer further submitted that in some cases, the final audited numbers differed significantly; resulting in less than expected profits after tax or the Boards took a posture to declare a lower dividend either to build reserves or fund their capital investments.

Lower than expected dividends resulted in significant variances.
Another factor that impacted on revenue, particularly other income, was the delayed execution of the planned investment divestitures in Lusaka Trust Hospital; Nanga Farms; Afrox; ZAFFICO; ZSIC GI; and ZSIC Life and Indeni.

The Board had resolved that IDC exits Lusaka Trust Hospital; Nanga Farms; and Afrox, while diluting its holding in ZAFFICO; ZSIC GI; and ZSIC Life; and Indeni.
He further apprised the Committee that the IDC, had finally divested from Afrox and Nanga Farms, while ZAFFICO had been listed on the Lusaka Stock Exchange.

The Committee learnt that the delay to divest was due to various factors such as low offers from the bidders.

With respect to Lusaka Trust Hospital, the offers had also fallen short of the expected offers from bidders while others offered a 100 per cent acquisition.
37 The Committee also learnt that in a bid to augment its income generation, which was initially 100 per cent dependent on the dividends from the subsidiary companies, the IDC had introduced management fees, which were cost plus and accounted for 43 per cent of the income.

The IDC had also invested in property from where they gained rental income.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

While noting the response, the Committee expresses concern on the structural composition of the IDC Board, with respect to the decisions made by the IDC on behalf of the shareholder (Minister of Finance and National Planning) who is equally a member of the Board.
The Committee is of the view that this does not meet the tenets of good corporate governance.

The Committee urges the Secretary to the Treasury to intervene in the matter.

The Committee will await an update on the matter.


7.3 Financial Analysis: Failure to produce Consolidated Audited Financial Statements The Controlling Officer submitted that the observation by the Auditor General that the IDC did not submit consolidated financial statements in accordance with section 267 (1) of the Companies Act of 2017, was correct and regrettable.
He further submitted that the IDC could only produce consolidated financial statements when all its subsidiaries and investee companies had completed their audited financial statements as required under the Companies Act and the International Financial Reporting Standards (IFRS).
He further submitted that for instance, the audited financial statements for Nitrogen Chemicals of Zambia (NCZ), had to be prepared commencing the financial year 2000 meaning the IDC could only produce audited consolidated financials when all the outstanding audits for NCZ were completed.
The Committee learnt that significant progress had been recorded in the preparation of audited financial statements across the Group, with 87 per cent of companies in the Group having audited financial statements for the financial year ending 31stDecember, 2020, while 13 per cent were work in progress.

This represented a significant improvement from a position of only 41 per cent having audited financial statements in 2019.
Furthermore, subsequent to the audit, the 2018 consolidated financial statements had been completed.

Having resolved, the legacy matters and appointment of new auditors, it was expected that the 2020 audit of consolidated financial statements would be completed by the second quarter of 2022.

The Controlling Officer further informed the Committee that in the absence of the audited financial statements, the IDC had tasked the subsidiaries to always prepare monthly management accounts.
He further submitted that for other subsidiaries such as Zampalm, there were transition challenges as opposed to legacy issues.

38 Committee’s Observations and Recommendations The Committee notes, with concern, the failure to prepare consolidated audited financial statements, which are a critical input in making financial decisions, both for the Group and the subsidiary companies.
While noting the cause of the delay in preparing consolidated financial statements, the Committee strongly recommends that the Controlling Officer formulates systems that should ensure timely preparation of the financial statements, which should equally stipulate sanctions to be meted out on the subsidiaries that delay in preparing their financial statements in accordance with section 72 of the Public Financial Management Act No.1 of 2018.
The Committee will await a progress report on the preparation and submission of the outstanding financial statements.
7.4 Operational Matters 7.4.1 Performance of Subsidiaries – Failure to Declare Dividends by Investee Companies The Controlling Officer submitted that the observation by the Auditor General that only six subsidiaries and two associates declared a total of K443,230,803 dividends, as shown in Table 7.1 below, against a budget of K418,427,218 expected from thirty-three subsidiaries shown in Table 7.2 and eight associate companies, was correct.
Table 7.1: Dividends Trend for the Period 2018 – 2020 39 S/NCOMPANY201820192020TOTALK'000K'000K'000K'0001 Indo-Zambia Bank Limited - 24,000,000 24,310,000 48,310,000 2 Indeni Petroleum Refinery Limited 28,014,000 30,788,010 52,288,000 111,090,010 3 Zambia National Commercial Bank Plc 1,227,188 9,200,000 18,720,000 29,147,188 4 Mulungushi Village Complex Limited 202,188 - 462,000 664,188 5 ZCCM Investments Holdings Plc 81,421,546 59,125,268 31,651,618 172,198,432 6Zambia Forestry and Forest Industries40,200,000 25,112,000 16,166,607 81,478,607 7 Zambia Railways Limited 100,000 - 100,000 8 ZEPRE 242,378 - 242,378 TOTAL151,407,300 148,225,278 143,598,226 443,230,803 Table 7.2 Dividend Payment Profile The Committee learnt that the portfolio of twenty-nine companies that were transferred to the IDC, eleven (38 per cent) had been technically insolvent companies; twenty-one (72 per cent) were loss making and with negative working capital; and one declaring dividends.
The Controlling Officer further submitted that such a portfolio had no capacity to declare dividends to the IDC.

The process of restructuring and transforming the portfolio had involved medium to long term interventions such as business remodelling; cost optimization; balance sheet restructuring; rightsizing; and recapitalisation.

The interventions undertaken by the IDC started yielding positive and tangible results.
These included but were not limited to the following: i. seven or 64 per cent of the companies that were technically insolvent were solvent; 40 S/NEnterprise / Associate IDC ShareholdingDividend History:Year of Acquisition /Incorporation by IDC1ZESCO100%No dividends paid in last 5 years8-24-152Kagem Mining25%No dividends paid since 20188-24-153ZAMTEL 100%No dividends paid in the last 5 years8-24-154INFRATEL100%No dividends paid in last 5 years8-23-185ZAMPALM90%No dividends paid in last 5 years9-12-176Zambia Railways100%Paid dividend of K100,000 for FY2014.8-24-157Zambia Cargo and Logistics Company Limited100%No dividends paid in last 5 years7-20-198Zambia Daily Mail Limited100%No dividends paid in the last 5 years.
8-24-159Times Printpak Zambia Limited100%No dividends paid in last 5 years8-24-1510Zambia International Trade Fair Limited100%No dividends paid in the last 5 years8-24-1511Mukuba Hotel Limited100%No dividends paid in the last 5 years.
8-24-1512Mulungushi International Conference Center Limited100%No dividends paid in last 5 years8-24-1513ZSIC Life Limited100%No dividend since 2018 8-24-1514ZSIC General Insurance Limited100%No dividends paid in last 5 years8-24-1515Zambia Industrial Commercial Bank Limited71.18%No dividend paid since 20188-31-1716Nitrogen Chemicals of Zambia Limited100%No dividends paid in last five years8-24-1517Superior Milling Company Limited76%No dividend paid since acquisition in 2017 11-23-1718Lusaka Trust Hospital Limited50%Declared dividend in 2014 of K2mn8-24-1519Lusaka South Multi-Facility Economic Zone Limited100%No dividends paid since incorporation (2013)8-24-1520Kawambwa Tea Industries100%1st Set of Accounts 1-29-1921Zambia Airways55%Not operational6-16-2022Zambia Power Company100%Not operational11-12-1523Marcopolo Tiles Company Limited22.60%Incorpoarted in 20204-6-2024Mpulungu Harbour Corporation Limited100%No dividends paid in last 5 years8-24-1525Medical Stors Limited100%No dividends paid in last 5 years8-24-1526Zambia Mulungushi China Textiles100%No dividends paid in last 5 years8-24-1527Niec Business School100%No dividends paid in last 5 years8-24-1528ZSIC Holding Limited100%No dividends paid in last 5 years8-24-1529Zamba Printing Company100%No dividends paid in last 5 years8-24-1530Engineering Services Corporation100%No dividends paid since incorporation8-24-1531Ngomye Power Company20%No dividends paid since incorporation12-12-1632Bangweulu Power Company20%No dividends paid since incorporation6-12-1633Kagem Minerals Limited25%No dividends paid in last 5 years8-24-15 ii.
iii.

iv.

out of the twenty-one companies that were loss making, only seven were still loss making as at December, 2021; the number of dividend-declaring companies increased from one in 2015 to eight in 2021;and eleven of the twenty-one companies that had negative working capital had net current asset working capital.

The interventions were expected to continue yielding positive results with a complete turnaround of the original portfolio in the medium term.
It was only at this point that the IDC expected dividends from all the companies in its portfolio.

The focus was to accelerate implementation of the turnaround strategies.

Noting the challenge of the companies in the Group declaring dividends which was the main source of revenue and the attendant risk to the Corporation‟s operations, the Board directed Management to diversify revenues by including management fees for services it provided to the subsidiaries.
Consequently, the revenue mix for the year 2021 was 57 per cent dividend; 43 per cent management fees; and 3 per cent other income.

The Controlling Officer further submitted that the IDC had a strategic plan for the period 2022 to 2025 with strategies such as recapitalisation; rightsising; business remodelling; and restructuring and full or partial divesture to make the companies viable and be in a position to declare dividends.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee resolves to keep the matter open and await a progress report on the performance of investee companies under the IDC.
7.4.2 Loss Making Investee Companies The Controlling Officer submitted that the observation by the Auditor General that out of the thirty- nine companies that were operational, twenty-five companies reported losses during the period under review as indicated in Table 7.3 below was correct.
41 The Controlling Officer informed the Committee that from the twenty-five companies listed, Infratel, Zampalm, Bangweulu Power Company and Ngonye Power Company were not expected to record profits as they were in their initial years of their incorporation and were not expected to break even.

ZSIC Holding, NIEC and Zambia Printing Company were dormant companies and were being wound down.

Therefore, no performance was expected from them.


Further, Medical Stores Limited had been converted in the Zambia Medicines and Medical Supplies Agency and since it was grant funded, was not expected to record profits, whereas Mulungushi Textiles was under care and maintenance of the Ministry of Defence.

He further submitted that as at December, 2021, based on unaudited financial statements, ten of the remaining listed companies recorded profits.
These were: ZESCO; Zambia Railways Limited; Zambia Daily Mail; ZSIC Life; ZSIC General Insurance Nitrogen Chemicals of Zambia (NCZ); Zambia Industrial Commercial Bank (ZICB); Mulungushi International Conference Centre; Superior Milling Company Limited; and Kagem Mining.
For the remaining companies, the IDC continued to implement transformation measures which included recapitalisation, rightsizing, and business remodelling and restructuring, which should result in them recording profits over the medium term.
42 201820192020K'000K'000K'000K'0001ZESCO100%19,900 (1,600,000) (4,000,000) (15,594,000) 2Kagem Mining25%442,000 (670,000) (5,900) (218,348,534) 3ZAMTEL 100%(800,000) (546,000) (304,000) (1,152,000) 4Infratel100%(667,800) - - (128) 5ZAMPALM90%124,000 (18,600) (44,600) - 6Zambia Railways100%1,600,000 (271,000) (252,000) (103,000) 7Zambia Cargo and Logistics Company Limited100%2,600,000 (370,000) (2,400,000) - 8Zambia Daily Mail Limited100%(66,700) (11,300) (9,000) (11,000) 9Times Printpak Zambia Ltd100%(526,900) (27,000) (60,600) - 10Zambia Int.
Trade Fair Ltd100%87,000 (8,100) (3,500) (2,500) 11Mukuba Hotel Limited100%3,000 (2,100) (1,900) (1,400) 12Mulungushi International Conference Center Limited100%545,000 (12,000) (4,000) (26,000) 13ZSIC Life Limited100%(53,200) 24,000 (18,000) 9,000 14ZSIC General Insurance Limited 100%(94,800) 6,000 (4,000) 4,500 15Zambia Ind.
Commercial Bank Limited71.18%159,000 (12,000) (34,000) (44,000) 16Nitrogen Chemicals of Zambia Limited100%(1,100,000) (286,900) (69,900) - 17Superior Milling Company Limited76%(47,000) (20,700) (20,100) - 18Lusaka Trust Hospital Ltd50%14,500 (4,100) (4,100) (51,700) 19Medical Stores Limited100%128,200 (27,589) 9,643 7,100 20Mulungushi Textiles Ltd33%(405) - - - 21ZSIC Holdings100%1,901 - - - 22Niec School of Business100%627 - - - 23Zambia Printing Company100%11,187 - - - 24Bangweulu Power Company20%(223,631) 22,368 (40,183) (166,969) 25Ngonye Power Company20%148,210 (13,589) 15,492 (4,812) Net Losses(3,848,610) (7,250,648) (235,485,443) The Controlling Officer also informed the Committee that the IDC was confident that the ten companies would record profits because of the strict monitory measures that had been instituted such as signing of performance contracts with the Boards who also signed performance contracts with various managements.
The performance contracts had a number of bench marks which were used to identify gaps and help to find solutions.

Committee’s Observations and Recommendations The Committee notes the response and will await a progress report on the performance of the ten companies whose financial statements had not been audited as at the time of reporting.
7.4.3 Investment in Loss Making Companies (1a) Zampalm The Controlling Officer submitted that the observation by the Auditor General that the advancement of investment loans to Zamplam while it was not in conformity with section 2.2 of the IDC Investment Policy and Guidelines, was correct.

He further submitted that the first IDC Investment Policy was developed and approved in 2018 which became effective June, 2018.
Prior to the development of the Investment Policy, investment decisions were guided entirely by the decisions of the Board and/or the IDC Shareholder (Government).

The decision to invest in Zampalm was based on Government‟s decision that IDC should acquire and develop the palm estate which had great potential to contribute to industrialisation, import substitution and job creation in the local area.
He further apprised the Committee that Zampalm was a green field investment and at the time of acquisition was not expected to be profitable as it was yet to break even.

Zampalm was a long- term developmental investment and was consistent with the IDC posture for long term investment risk.

To this effect the investment was not irregular.


The Controlling Officer further informed the Committee that the Investment Policy which was in effect, allowed the IDC to invest in a green field project provided the project supported the attainment of at least one of the national development goals, project returns were higher than cost of capital utilised and the project demonstrated dividend earnings potential, foreign exchange earnings benefits, import substitution or rural development.
Further the project must return a positive Net Present Value (NPV) within the first ten years of forecasted operations and an Internal Rate of Return (IRR) that was equivalent to or higher than the IDC weighted average cost of capital.

Under these criteria, the Zampalm acquisition would still qualify.

The Committee also learnt that at the time of acquisition, Zampalm was loss making, however, the decision was based on the future potential and projections.
The Committee also learnt that the company was still making losses and that IDC would continue to support its working capital till 2025 when it‟s anticipated that it will breakeven.

43 Committee’s Observations and Recommendations While noting the submission with regard to the decision to acquire Zampalm, the Committee expresses concern that even though the potential of Zampalm is promising, the company has continued to record losses and failed to breakeven.
The Committee is disappointed to note that the assumptions made when acquiring the company have failed to yield the expected results.

The Committee recommends that the Treasury, which is part of the shareholders must revisit the investment in Zampalm to ascertain whether it is worthwhile to continue injecting funds in it.

The Committee resolves to await an update on the matter.
(ib) Lack of Financial Statements for ZAMPALM The Controlling Officer submitted that Zampalm had audited financial statements up to the year ended 31st December, 2019.

The delay in producing audited financial statements for 2020 was due to the transitioning from management by ZAMBEEF Plc to the management appointed by the Board of Zampalm.

During the period ZamPalm was managed by ZAMBEEF Plc, it was audited by the external auditors of the ZAMBEEF Plc Group.
The audit of Zampalm was planned to be completed within the second quarter of 2022.

He further submitted that in the absence of audited financial statements, management accounts had been used to inform decisions regarding the performance of Zampalm.

A copy of management accounts for the year ended 31st December, 2020 had been shared with the auditors.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification subject to which the matter should be closed if there are no other irregularities on the matter.

The Committee further recommends that the Controlling Officer should ensure that accounts of Zamplan are audited going forward.

(i) a.
(i) a.

Superior Milling Company Limited Irregular Acquisition of the Company The Controlling Officer submitted that the observations of the Auditor General were noted.

He further submitted that at the time of the acquisition of Superior Milling Company Limited (SMCL), investment decisions were guided by the Board and/or the IDC Shareholder (Government).

The first IDC Investment Policy was developed and approved in 2018, which became effective June, 2018.
The transaction was, therefore, not irregular as it was undertaken within the guidelines in place at the time of its acquisition.

The decision to invest in SMCL was based on Government‟s desire to have a strategic foothold on mealie meal pricing as it was a national food security issue.

SMCL was, therefore, acquired with a view of impacting the stability of mealie-meal prices without distorting the market structure.
44 The Committee also learnt that the Investment Policy of the IDC which was in effect allowed the IDC to invest in brownfield or greenfield projects classified as socio-economic targeted investments.

Some of these investments did not meet stipulated investment performance benchmarks such as profitability, provided they had majority Zambian ownership, a sustainable business model and present a compelling case for their potential to contribute towards job creation, rural development and value addition.
Further, such investments must drive social impact through the creation of a minimum of fifty direct jobs, demonstrate a payback period not exceeding ten years and the investment should not exceed a threshold of US$10million.

Under these criteria, the acquisition of Superior Milling would still qualify.
At the time of acquisition, the IDC was cognisant of the issues raised in the due diligence and was confident that the issues raised, such as working capital, corporate governance, statutory liabilities and balance sheet restructuring would be resolved through effective supervision and targeted shareholding interventions.

As at December, 2021, the company recorded total revenues of K209.74 million and a net profit of K2.68 million.
Committee’s Observations and Recommendations While noting that the company recorded a total revenue of K209.74 million and a net profit of K 2.8 million, the Committee expresses concern on the manner in which decisions were made to invest, both in superior milling and Zampalm.

The Committee is of the considered view that the investments were made to satisfy the Board as they were made against the prevailing financial information at the time.
The Committee condemns this and urges the Treasury to ensure that the IDC adheres to investing in viable projects.

The Committee resolves to close the matter.

b.

Failure to prepare Financial Statements The Controlling Officer submitted that the observation of the Auditor General was noted.

The financial statements for the financial year 2020 were being finalised.
Committee’s Observations and Recommendations The Committee notes the response and expresses displeasure at the failure to prepare financial statements.

The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, after which the matter should be closed, if there are no further irregularities on the matter.
7.4.4 Weaknesses in Management of Brown Field Projects i. a. Munushi Fruit Company Limited Failure to Avail Information on Rehabilitation of Infrastructure and Associated Works The Controlling Officer submitted that the copies of the advance payment guarantee and the new performance bond were provided to the Auditors.

Copies were available for verification.


45 Committee’s Observations and Recommendations The Committee notes the submission and expresses concern why information was not availed to the Auditor General at the time of the audit.

The Committee therefore, recommends that all documents in support of the submission should be submitted to the Auditor General for verification after which, if there are no irregularities, the matter should be closed.

b.
b.

Failure to avail Accounting Information The Controlling Officer submitted that the information on cost of investment in the project, budgets and expenditure details, and amounts invested was provided to the auditors using a dedicated web-based database.

The information was available for verification.

Committee’s Observations and Recommendations The Committee notes the submission but expresses concern as to why; the said information was not availed to the auditors at the time of the audit.
In this regard, the Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification after which, if there are no further irregularities, the matter should be closed.

c. Kawambwa Tea Industries Limited - Failure to Maintain a Non – current Assets Register The Controlling Officer submitted that the observation of the Auditor General was noted.
He further informed the Committee that the IDC had since directed ZAFFICO Plc and Kawambwa Tea Industries Limited to finalise the transfer of assets between the two companies and put in place a complete asset register.

This exercise was expected to be completed by the end of the second quarter of 2022.

The Controlling Officer also apprised the Committee that ZAFFICO had been entrusted to manage Kawambwa Tea Industries under a management contract due to its expertise in the management of plantations.
He further submitted that the delay was as a result of the existing process which had fully been done and Kawambwa Tea Industries was operating as a stand-alone company.

Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General, after which if there are no further irregularities on the matter, it should be closed.
46 d. i. Kaleni Hills Fruit Company and Eastern Tropical Fruits Delayed Implementation The Controlling Officer submitted that the observation by the Auditor General was noted.

He further submitted that progress on the projects was negatively impacted by the Covid pandemic.

The onset of the pandemic delayed the capital raise, factory acceptance tests of the equipment and the shipment of the equipment.
The two projects had since attained civil works of 95 per cent and 90 per cent for Kalene and Eastern Hills Fruit Company respectively.

Equipment had been delivered on site and employee recruitment and farmer-on boarding had commenced.

The plants were expected to be commissioned within the second quarter of 2022.

Committee’s Observations and Recommendations The Committee notes the response and resolves to keep the matter remains open in view, for future audits.
The Committee also awaits a progress report on the commissioning of the plants.

7.5 Staff Related Matters i. Irregular Procurement of Personal to Holder Vehicle – Group Chief Executive Officer The Controlling Officer submitted that the observation of the Auditor General was noted.

He further submitted that the procurement was not irregular because the Conditions of Service of the Group Chief Executive Officer (GCEO) were determined by the Board of Directors.

The Companies Act No.


10 of 2017 and the Articles of Association of IDC gave the company the power to determine conditions of service for the GCEO as it deemed fit.

Further, the policy of the IDC Group of Companies was that Conditions of Service must be determined on the principle of „Ability to Pay‟.
The IDC Group therefore did not standardise conditions of service across its companies but allowed each Board of Directors, in line with the Companies Act, to determine the conditions of service of a company based on its ability to pay and this included the IDC as Holding Company.
The guidance of the IDC Board, therefore, with respect to the inconsistency between its policy on ability to pay and the Cabinet Circular was that companies should only implement conditions of service based on their ability to pay.

It was therefore on this basis that the GCEO‟s conditions were determined.

The purchase of the GCEO‟s motor vehicle was, therefore, consistent with the approved conditions of service.
The Controlling Officer further submitted that the conditions of service applicable to the Chief Executive Officer (CEOs) in the IDC Group varied from company to company.

Implementing the Cabinet Circular without recourse to the company‟s financial position could prove detrimental to the operations of the company and disadvantage CEOs who earned less, while advantaging those who earned more.
The IDC was awaiting further guidance from the new Board on the handling of this inconsistency between the position of the Board in line with the Companies Act and the provisions of the Cabinet Circular.

47 The Controlling Officer further submitted that the decision by the IDC to proceed to adhere to their set conditions of service was informed by section 5 of the Companies Act No.
10 of 2017 which stipulated that subject to the Constitution, and the Banking and Financial Services Act, 2017, and the Securities Act, 2016, where there was any inconsistency between the provisions of the Companies Act and the provisions of any other written law, the provisions of the Act shall prevail to the extent of the inconsistency.
Committee’s Observations and Recommendations While noting the Controlling Officers response as to why the IDC ignored Cabinet Circular No.17 of 2016 which abolished the provision of the personal-to-holder motor vehicles, the Committee notes, with concern, that while the IDC is a Government entity, it only prefers to be considered as such only when it benefits the IDC staff and not the country at large.
The Committee notes that the IDC undertook various investment decisions with respect to Zampalm and Superior Milling, anchoring its decisions on the aspirations of the shareholder while it resolved to exempt itself from the Cabinet Circular.

The Committee notes the provision of section 5 of the Companies Act No.

10 of 2017 but finds it irregular that the IDC failed to seek clarity on the inconsistency before deciding to ignore the Circular.
The Committee is disappointed to note that the IDC failed to seek clarity on the conflict of the provisions of the Companies Act and section 3 of the Public Finance Management Act No.1 of 2018 which is superior to the Companies Act when it relates to matters of management of public funds.

In light of the above, the Committee directs the Secretary to the Treasury to enhance supervision of the IDC and to ensure that a supervisory framework is put in place.
The Committee further directs that disciplinary action should be instituted against all officers who deliberately decided to ignore the provisions of the Public Finance Management Act No.1 of 2018.

The Committee will await an update on the matter.


8.0 JUDICIARY An examination of financial and other records for the Financial Year ended 31st December, 2020 maintained at the Judiciary Headquarters and selected stations revealed various irregularities to which the Controlling Officer responded as set out below.
8.1 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the Judiciary had a deficit of K35, 541,009 against its budget and income of K516, 346,304, for the financial year 1st January to 31st December, 2020, was correct.

She further submitted that the underfunding was beyond the Judiciary‟s control as funding was done by the Ministry of Finance and National Planning.
Committee’s Observations and Recommendations The Committee notes the response and urges the Secretary to the Treasury to ensure that the Judiciary is funded sufficiently to enable it execute its role of dispensing justice considering that 48 justice delayed is justice denied.

The Committee resolves to close the matter but keep it in view during future audits.
8.2 Accounting Irregularities 8.2.1 Irregular Use of Accountable Imprest – Client Account Kitwe The Controlling Officer informed the Committee that the observations by the Auditor General were correct and that what necessitated the expense was the court order; a Writ of Possession which needed to be executed with utmost urgency.

This was because the said execution had earlier been suspended by Management in order to come up with some modalities for proper accountability when executing Writs of Possession.
Further, the execution was conducted in the night as it was not an ordinary one which could be done during the day as it involved re- possessing land from squatters popularly known as Jerabos on a mine.

The squatters had dangerous weapons.

There was also a looming riot from the said squatters, hence the nature of the execution required for the officers involved to be in safety clothing.

The goods which were procured were the safety clothing.
The Controlling Officer further apprised the Committee that even with the promptness with which the execution was done, the squatters still managed to offer a lot of resistance and attacked the officers during the execution, resulting in some people getting injured and hired vehicles getting burned and damaged, such that Mopani had to compensate the owners of the vehicles.
Police reports relating to the above incident and photos showing the damaged vehicles, which prompted the Judiciary to act in that manner, were availed for audit during the verification the responses.

In light of the above, the procurement was done because the execution was urgent and risky.

However, the imprest was utilised in totality and all of it was accounted for by the officer and retirement details were verified by the officers from the Office of the Auditor General.
Committee’s Observations and Recommendations The Committee notes the response and recommends that the matter should be resolved administratively and resolves to close the matter.

8.2.2 Non-Remittance of VAT K 40,535 The Controlling Officer submitted that the Auditor General‟s observations had been noted.
She further submitted that out of the queried transactions, the first sixteen transactions related to the procurement of fuel and the Judiciary had run contracts with all the suppliers of fuel and on such accounts, VAT was not withheld, and was remitted by the suppliers.

With regards to the remaining transactions, the office had challenges in remitting tax to Zambia Revenue Authority (ZRA), as ZRA was not accepting cheques after the introduction of the tax online e-payment platform.
In light of this, the Headquarters engaged ZRA on the matter and a training program was conducted in December, 2020 where the officers were subsequently trained 49 together with some Zambia National Commercial Bank officers, on the remittance of VAT and withholding tax.

She further submitted that after the training, the Judiciary engaged the various suppliers on a case by case basis.

The Judiciary would transfer the money to a supplier in question that would then pay ZRA.
Documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all the documents in support of the submission after which the matter should be closed if there are no other irregularities on the same matter.

8.3 Staff Related Matters 8.3.1 Failure to Fill Vacant Positions 948 The Controlling Officer submitted that the Auditor General‟s observations had been noted.
She further submitted that the Judiciary was unable to fill all the 948 vacant positions due to lack of fiscal space.

Further, the Treasury guided the Judiciary to defer recruitments to the 2021 - 2023 medium term revenues permitting.

This was owing to the exhaustion of funds earmarked for centralised recruitment which was utilised on the recruitment of medical personnel to combat the COVID – 19 pandemic.
However, in 2021 the Treasury issued Treasury authority to create and fill positions effective 1st October, 2021, which positions the Judiciary started filling following the lifting of suspension on appointments by the Secretary to the Cabinet.

Documentary evidence was availed for verification.

She further submitted that in 2020, there was no Treasury authority; hence the main challenge was lack of funds.
However, following the Treasury authority of 2021, the Judiciary had filled 171 positions out of the 948.

The positions filled excluded the local courts which had a higher number of people with ligation cases.

Some of the positions filled included the following: i. three Supreme Court Judges; ii.

three Constitutional Judges; iii.

eleven High Court Judges; iv.

three Chief Resident Magistrates; v. nine Principal Resident Magistrates; vi.

seven Senior Resident Magistrates and 50 vii.


one Magistrate Class 1.

Committee’s Observations and Recommendations The Committee notes, with concern, that the Judiciary has a high number of unfilled staff vacancies.

The Committee notes that despite the Treasury authority for the Judiciary to employ, they only managed to employ 171 out of the queried number of 948.
The Committee also observes that the local courts have not been catered for in as much as they are the ones which handle many litigation cases.

It is the Committee‟s considered view that the challenge of staff shortage is hampering the prompt and timely delivery of justice.

The Committee urges the Secretary to the Treasury to promptly intervene in the matter and resolves to await an update on the matter.
8.3.2 Irregular Payment of Rural and Remote Hardship Allowances K 86,263 The Controlling Officer submitted that Management had noted the Auditor General‟s observation.

She further informed the Committee that the said allowances were terminated and the overpayments had since been recovered.

However, during the audit verification, the Auditor General could not drop the queries on production of the payslips because they also needed the historical payslips when the corrective action was effected.
The historical payslips could not be availed at that time because the payroll was closed.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee takes note of the Controlling Officer‟s submission and expresses displeasure that while the matter has since been resolved and the irregular payments have since been stopped, the query has become perennial as it appeared in the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Years 2017 and 2018 respectively.
The Committee notes that in 2017, the irregular payment amounted to K 134, 963 while in 2018 it skyrocketed to K 447,693.

The Committee is of the considered view that this is a sure sign of a collapse in the internal controls of the Judiciary and that substantive office holders have failed to efficiently execute their duties.
In this regard, the Committee recommends that the Controlling Officer institutes disciplinary measures against all officers responsible for the irregular payments, including supervisors who authorised the payments or failed to stop them.

The Committee further recommends that the Controlling Officer ensures that internal systems are strengthened in accordance with section 15 (1)(aiii) of the Public Finance Management Act No.

1 of 2018.

The Committee will await an update on the matter.


8.3.3 Failure to Deduct and Remit NAPSA Contributions K98,513.89 The Controlling Officer submitted that Management had noted the Auditor General‟s observation and that it was regrettable.

She further submitted that the non-deduction of statutory contributions was due to an error on the configuration of the Payroll Management and Establishment Control (PMEC) System.
The Committee learnt that the statutory contributions were effected on the PMEC system for the queried officers.

With respect to the previous months 51 of non-remitted contributions, the Office of the Secretary to the Treasury was engaged to recover and remit the contributions.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes, with concern, that an important deduction code was omitted on the payroll system and that it had to take the auditors to raise a flag for Management to be aware of the irregularity.

Furthermore, the Committee is perturbed that Management took a reactive approach to resolving the query as evidenced by the documents submitted to the Committee.
The Committee recommends that the Controlling Officer ensures that a robust system is put in place, and to ensure that internal control systems are enhanced in accordance with section 15 (1)(aiii) of the Public Finance Management Act No.

1 of 2018 and to take a proactive approach in resolving any queries that are cited by the Auditor General.

The Committee further recommends that disciplinary action should be instituted against all officers who failed to execute their duties diligently.
The Committee will await an update on the matter.

8.4 Asset Management 8.4.1 Failure to Secure Title Deeds The Controlling Officer submitted that the Auditor General‟s observations that sixteen parcels of land belonging to the Judiciary lacked title deeds, was correct.

She further submitted that Management had commenced the process of acquiring title deeds.
She further submitted that the Judiciary had since identified all its properties and an inventory had been created for all the Judiciary Properties from the ten provinces.

The Institution conducted an exercise in collaboration with the then Ministry of Works and Supply- Government Valuation Department to identify the site/plot extents and the size of the property on site.
The report on the identified properties was then submitted to Ministry of Works and Supply for recommendations for title deed acquisition.

The Committee learnt that the then Ministry of Works and Supply had recommended four provinces; namely Lusaka; Central; Western; and Southern provinces for the process of title deed acquisition; remaining with six provinces; namely Eastern; Copperbelt; North Western; Luapula; Northern; and Muchinga Provinces, which were yet to be recommended.
The recommendation categorised properties into two: i. properties that were not yet planned, numbered, surveyed and offered; and ii.

properties that were already planned, numbered and surveyed.

The recommendation report indicated action to be taken for each category of properties above.
Furthermore, the Judiciary upon receiving the recommendations for the four provinces, proceeded to write to the Regional Surveyor, Ministry of Lands and Natural Resources to engage Land Surveyors and Planners to ensure that all sites from the four provinces were picked, planned, site plans approved, numbered and survey diagrams produced in accordance with Cabinet Office Circular Minute of 2020, dated 25th November, 2020.
The Ministry of Lands and 52 Natural Resources had since been engaged to survey and produce site plans and survey diagrams.

This exercise would begin once funds were available and the Judiciary had since engaged the Secretary to the Cabinet on the budget required for this exercise, following a circular to have all properties titled.
The Judiciary had engaged the Chiefs, through the Provincial Local Court Officers to request for recommendation letters over pieces of land and court buildings sitting on customary (traditional) land for facilitation of survey diagrams and land titles.

Furthermore, the Treasury advised that this money would be made available in the 2022 Budget.
Committee’s Observations and Recommendations The Committee notes the response and recommends that the Controlling Officer ensures that the Judiciary prioritises areas with potential encroachments.

The Committee will await an update on the matter.

8.4.2 Failure to Insure Property–Real Estate Account Headquarters The Controlling Officer submitted that the observations by the Auditor General were correct.
She further submitted that the process of insuring Judiciary properties would commence once the process of obtaining values of the properties was concluded.

The values of the properties were required by insurance firms to determine sum insured.

Valuation of the fifty-nine residential properties had been an on-going process and fifty-one, had since been valued, as set out below.

i. Lusaka Province - Thornpark Flats- 44 units- valued at K24, 664,452.00. ii.
Lusaka Province - Kabwata Flats, 4 units – valued at K1,273,620.00.

iii.

Lusaka Province - Chief Justice Lodge (dilapidated), 1 unit – valued at K4,500,000.00.

iv.

Northern Province- Mbala – valued at K368,454.00.

v. Northern Province Kasama – valued at K1, 042,313.00.

The Judiciary could not complete this exercise in 2021 due to lack of funding.

However, funds for this process had been secured in the 2022 Budget.
With regards to the Chief Justice‟s Lodge, the property was gutted by fire and the Committee learnt that the matter was reported to the Police.

The Judiciary wrote to the Ministry responsible for infrastructure for the rehabilitation and modernising of the said structure.

Rehabilitation works could not commence in 2021 due to lack of funding.

She further submitted that only Central Province had not been valued out of the ten provinces.
Once it was valued, the total value of the Judiciary would be ascertained.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to ensure that the process of insuring the properties does not under-value any properties considering that the Judiciary has a 53 number of dilapidated infrastructure.
The Committee further recommends that the Controlling Officer ensures that infrastructure for the Judiciary is always maintained in accordance with Financial Regulation No.

41 of the 2020.

The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the completion of the evaluation exercise.
8.4.3 Failure to Complete Valuation of Properties The Controlling Officer reiterated her submission with respect to the valuation of the properties belonging to the Judiciary.

She further submitted that the final valuation of all the properties under the Judiciary would be ascertained by the end of March, 2022.
Committee’s Observations and Recommendations The Committee reiterates its recommendation with respect to ensuring that all infrastructure falling under the Judiciary is managed in accordance with Financial Regulation No.

41 of 2020.

The Committee resolves to await a progress report on the matter.

8.4.4 Poor Maintenance of Properties A physical inspection of selected real estate properties in five districts revealed that the properties were dilapidated due to lack of maintenance.
In particular, the following were observed and the Controlling Officer responded as follows: i. Lusaka District – Lusaka Thorn Park (Stand No.

Lus/8138) and Kabwata Flats (Stand No.

Lus/10068) The Controlling Officer submitted that the Auditor General‟s observations were correct.
She further apprised the Committee that the Judiciary had engaged the then Ministry of Works and Supply to assess the buildings and capture all the defects required for rehabilitation and prepare the bills of quantities to enable the Judiciary to commence the procurement process for the rehabilitation works.

In this regard, bills of quantities had been prepared and submitted to the Judiciary.

The works could not commence in 2021 due to lack of funding from the Treasury.
She further informed the Committee that funds for these works had been secured in the 2022 infrastructure budget line.

Documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await a progress report on the rehabilitation of the flats.

54 ii.

Ndola District a.


Judges Residence, House-No.6 The Controlling Officer submitted that the observation by the Auditor General that most of the infrastructure under the Judiciary was in a deplorable state, was correct.

She further submitted that, as a result, the Judiciary had engaged the then Ministry of Works and Supply for the rehabilitation of the properties in question especially the Judges‟ Houses.
She further informed the Committee that the Judiciary would advertise for the required services before the end of the second quarter.

Documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee observes, with concern that deterioration of properties can lead to loss of market value and increase in maintenance costs.
The Committee is disappointed to note that Management allowed the infrastructure to deteriorate to the level that they were rendered not fit for occupation.

The Committee recommends that the Controlling Officer ensures that a maintenance policy is formulated and to put in place control measures that will help prevent other properties which are in good condition from deteriorating, in accordance with Financial Regulation No.

39 (2) of 2020.
39 (2) of 2020.

The Committee resolves to await an update on the rehabilitation of the property in question.

b.

House No.18 The Controlling Officer reiterated that the observation by the Auditor General with respect to the deplorable state of infrastructure was correct.

She further reiterated that plans were underway to rehabilitate the property in question.
Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need to manage infrastructure in accordance with Financial Regulation No.

39 (2) of 2020.

The Committee resolves to await an update on the rehabilitation of the property in question.

iii Samfya a Residential House-House No.

1 The Controlling Officer reiterated that the observation by the Auditor General with respect to the deplorable state of infrastructure was correct.
She further reiterated that plans were underway to rehabilitate the property in question.

Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need to manage infrastructure in accordance with Financial Regulation No.

39 (2) of 2020.

The Committee resolves to await an update on the rehabilitation of the property in question.

55 iv.
55 iv.

Chibombo District-Liteta Local Court Building The Controlling Officer reiterated that the observation by the Auditor General with respect to the deplorable state of infrastructure was correct.

She further reiterated that plans were underway to rehabilitate the property in question.

Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need to manage infrastructure in accordance with Financial Regulation No.

39 (2) of 2020.
39 (2) of 2020.

The Committee resolves to await an update on the rehabilitation of the property in question.

v. Mumbwa District-Mumbwa Urban Local The Controlling Officer reiterated that the observation by the Auditor General with respect to the deplorable state of infrastructure was correct.

She further reiterated that plans were underway to rehabilitate the property in question.
Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need to manage infrastructure in accordance with Financial Regulation No.

39 (2) of 2020.

The Committee resolves to await an update on the rehabilitation of the property in question.

8.5 Delayed Completion of Infrastructure Projects The Controlling Officer submitted that the Auditor General‟s observations were correct.
She further informed the Committee that inadequate funding for capital projects from the Treasury had negatively impacted the completion of the on-going capital projects.

The projects could not be completed on time as per the contracts due to lack of funds.

She further apprised the Committee that the budgetary allocation towards funding for capital projects had constantly been reduced in the previous years.
In 2019, funding was 5 per cent of the total budgetary allocation and this had severely compromised the Judiciary‟s ability to complete the outstanding projects, undertake rehabilitation and new construction works.

The Controlling Officer further submitted that the Judiciary had noted the delay to complete the projects and had continued to engage the Office of the Secretary to the Treasury to lobby for funds to pay the outstanding balances on the interim Payment Certificates.
The Judiciary was pleased to state that in the 2022 National Budget, the Court Infrastructure budget line had been funded and all the outstanding balances on the certificates had since been cleared as per the documentary evidence which was availed for verification.
Following the availability of funds for the completion of the stalled capital projects and legal guidance received from the Office of the Attorney General advising that all contracts expired and were null and void and that the Judiciary needed to enter into new contracts which must be in accordance with the procurement laws and regulation, the Judiciary had developed an 56 Infrastructure Road Map (Action Item-Schedule) on how to execute the contracts on time through re-tendering process.
This road map defined activities such as the re-assessment of the remaining works, defects and value/cost the works and prepare the bills of quantities for re- tendering processes which was envisaged to be completed before the end of the first quarter.

All outstanding projects were envisioned to be complete before the end of the year.
Committee’s Observations and Recommendations While noting the strides made in completing outstanding works, the Committee observes, with concern, the delay in completing the projects in question, which has a negative effect on the achievement of the strategic objectives, including but not limited, to access to justice and expeditious delivery of justice.

In this regard, the Committee urges the Secretary to the Treasury to ensure that funds are availed for the completion of all outstanding works.
The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await a progress report.

8.6 Other Incomplete Projects The Controlling Officer reiterated that inadequate funding had negatively affected completion of works both at the Matero Urban Local Court and the construction of two low-cost houses at Mumbezhi–Kabompo District.
She further reiterated that the Judiciary would complete all the outstanding works before the end of the year in line with the developed Infrastructure Road Map (Action Item- Schedule) on how to execute the contracts on time through re-tendering process including those which had been abandoned and had poor workmanship.

Committee’s Observations and Recommendations The Committee notes, with disappointment, the poor execution of most of the outstanding works.
The Committee strongly urges the Controlling Officer and the Treasury to ensure that reliable contractors are engaged, going forward and that the provisions of the Public Procurement Act No.

8 of 2020 must be adhered to strictly.

The Committee resolves to await a progress report on the matter.
9.0 KAPASA MAKASA UNIVERSITY: MINISTRY OF EDUCATION An examination of financial and other records for the Financial Years Ended 31st December, 2017, 2018 and 2019 maintained at Kapasa Makasa University revealed various irregularities to which the Controlling Officer responded as set out below.

9.1 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the University recorded a deficit of K 1,011,126 against its budget of K 25,086,451 was correct.
She further submitted that the University was not funded adequately in 2019 and had a variance of K 2,009,070.

She further submitted that in 2020, one grant equivalent to K1,004,500 was paid to 57 the University above the anticipated annual grants for the Institution causing a surplus for the financial year.
The Controlling Officer submitted that with regard to Kapasa Makasa University (KMU) income from non-grant revenue, the budgeted incomes reduced by K4,000 and K2,500 for 2019 and 2020 respectively, due to challenges experienced with water supply for the aquaculture project which was located on campus.

The water supply dedicated for fish ponds was diverted most of the times to other consumption points whenever inadequate water was received from Chambeshi Water and Sewerage Company.
In this regard, inadequate supply of water to fish ponds reduced production hence low stock.

This contributed to low income for the Institution.

The Committee also learnt that KMU was operating as a satellite university under the CBU and that during the period under review, tuition fees were collected by CBU Management and KMU did not know what the funding challenges were.
However, as a result of inadequate funding, the University had challenges with power supply, water supply and furniture for bed spaces.

The Committee was also informed that KMU was established to operate without much dependence on Government, and in that regard, the University augmented the inadequate funding through non-grant revenue generated from fish farming.

The Committee further learnt that during the period under review, KMU had a student population of 700 and an exhausted capacity of 800 students.
Furthermore, 95 per cent of the students were sponsored by the Loans and Guarantees Board.

The Controlling Officer also informed the Committee that KMU had since been moved from CBU Management and that the funding to the entity had been consistent since December, 2021.
Committee’s Observations and Recommendations While noting that the formation of KMU was progressive, the Committee is disappointed to note that the Executive did not put in place the required structures for the University to operate properly.

The Committee notes that the University has an un-exhausted student capacity of 800 even though it lacks sufficient funding to operationalise the University to its full capacity.
The Committee urges the Secretary to the Treasury to intervene promptly and to support the model of management which is less dependent on government funding.

The Committee resolves to await an update on the matter.

9.2 Failure to Prepare Financial Reports The Controlling Officer submitted that the observation by the Auditor General regarding failure to prepare Financial Reports was noted and acknowledged.
She further submitted that during the period under review, Kapasa Makasa University was run as a satellite campus of CBU and as such University was identified by separate chart of accounts within Copperbelt University financial statements.

In this regard, the annual financial statements for the period under review were to be prepared by Copperbelt University.

She further, informed the Committee that following the delinking of Kapasa Makasa University from Copperbelt University in June 2021.
The University was mandated to prepare financial statements accordingly.

58 The Committee further learnt that KMU did not prepare any segmented annual reports and that the University was in the process of preparing the reports for 2021.

The Controlling Officer further informed the Committee that CBU did not prepare the annual reports due to a system crash in 2017.

However, the annual reports for 2019 and 2020 had since been prepared and the reports for 2019 awaited the Council approval.
Documents were availed for verification.

Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification.

The Committee further urges the Controlling Officer to ensure that provisions of section 72(3) of the Public Finance Management Act No.1 of 2018 are adhered to.

The Committee will await an update on the matter.


9.3 Operational Matter - Failure to Operationalise the Library The Controlling Officer submitted that the observation by the Auditor General regarding failure to operationalise the library was noted and acknowledged.

She further submitted that the delayed operationalisation of the library was as a result of inadequate Government capital funding.
In this regard, KMU Management was exploring other sources of income generating ventures such as fish farming and animal husbandry to supplement on Government funding.
The Controlling Officer also informed the Committee that the University envisaged to install ten shelves before the end of 2022 and that the University could not rely on the income from tuition fees from continuing students, as all the tuition fees (tuition, accommodation, medical and recreation) would be transferred to CBU and that no modalities had been agreed upon on how the funds would be shared.
The Committee also learnt that during the setting-up of the University, the government had channelled K 26 million to CBU for operationalisation of the University and that the same funds could have been used to ensure that the library was functional.

However, the funds were also used on capital projects, such as rewiring of the buildings at a cost of K2million after the contractor who had been engaged by the then Ministry of Higher Education abandoned the site.
The Committee further learnt CBU decided to use the funds for operationalisation to fund other operational costs such as provision of water, internet connectivity among others.

The Committee also learnt that a detailed report was prepared on how the K26 million was expended.

Committee’s Observations and Recommendations The Committee reiterates its observation that the KMU was established without ensuring that all relevant structures were in place for efficient operationalisation.
The Committee notes, with extreme concern, how K26 million was expended.

The Committee finds it unacceptable that the funds which were meant for operationalisation were used to fund capital projects, worse off as a remedial measure to rewire the buildings for which a contractor had been paid.
The Committee recommends that the matter should be reported to the Police for the recovery of the funds paid to the contractor for re-wiring, failure to which, the K2 million should be deemed wasteful 59 expenditure and recoverable.

The Committee further urges the Auditor General to conduct a forensic audit on the matter and that all officers who will be found wanting should be brought to book.

The Committee further directs the Controlling Officer to avail the report on how the K26 million was used.
The Committee will await an update on the matter.

9.4 Accounting Irregularities 9.4.1 Unretired Accountable Imprest K50,993 The observation by the Auditor General regarding unretired accountable imprest was noted and acknowledged.

She further informed the Committee that retirement documents had since been retrieved and in cases where employees had failed to retire the imprests, letters were sent to Copperbelt University to effect recoveries through payroll.
The Committee learnt that the unretired accountable imprest hinged on the conditions of service for the staff from the CBU Management who would from time to time travel to KMU.

Some of the items expended on were payment for kilometre allowance which should not have been part of the list, payment for staff who worked over lunch though a decision was made that the funds spent on the activity should be refunded.
The Committee also learnt that the other challenge was that there was a time lag as the staff that would have received the funds from KMU could only retire the funds in question after returning to KMU.

The Controlling Officer submitted that the other challenge was poor filing of the accounting documents.

Furthermore, the Committee learnt that out of the nine staff, only one was dismissed for professional misconduct and that the whole amount had been retired and recovered where applicable.
Committee’s Observations and Recommendations The Committee observes, with concern, that KMU and CBU Management had to wait for the auditors to detect that accountable imprest had not been retired.

In this regard, the Committee recommends that all officers who did not take up appropriate responsibilities should be surcharged for financial misconduct, in accordance with section 52 (2) of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee finds it awkward that KMU was the one paying the staff from CBU using the funds meant for operationalisation, as opposed to paying employee allowances.

The Committee urges the Secretary to the Treasury to caution the entities in question against such questionable management models.

The Committee resolves to await an update on the matter.
9.4.2 Use of Imprest to Procure Goods and Services K14,000 The Controlling Officer submitted that the observation by the Auditor General regarding the use of imprest to procure goods and services was noted and acknowledged.

She further submitted that Management erred in issuing imprest to procure goods and services whose value could be ascertained at the time.

She further submitted that all the imprest in question, had been retired.
The Committee learnt that Management had since stopped the practice of getting imprest in 60 advance to purchase goods and services whose value could be ascertained and all documents had since been retired and no further action had been taken against the officer in question.
Committee’s Observations and Recommendations The Committee notes the response and directs that the officer responsible for the query and all the supervisors who failed to take appropriate responsible action should be surcharged in line with section 52 of the Public Finance Management Act No.

1 of 2018 and directs the Controlling Officer to ensure that Financial Regulation No.

94 of 2020 is strictly adhered to.

The Committee will await an update on the matter.


9.4.3 Unsupported Payments K1,381,811 The Controlling Officer submitted that the observation by the Auditor General regarding unsupported payments was noted and acknowledged.

She further submitted that poor recordkeeping was occasioned by the member of staff whose employment was terminated in 2020 due to professional misconduct in procurement and management of stores.
Furthermore, the Controlling Officer submitted that following the delinkage of KMU from CBU, Management had increased staff numbers in procurement, stores and accounts in order to improve record keeping as opposed to having a lean structure.

The Controlling Officer submitted that management had been following up with various suppliers and some members of staff for relevant documents.
As a result, twenty-seven payments of amounts totalling K1,053, 143 had been cleared upon tracing the missing relevant documents leaving thirteen payments with a total amount of K328, 667.

Furthermore, the Controlling Officer submitted that Management was committed to ensuring that the relevant documents for the remaining outstanding payments were traced.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and recommends that the Controlling Officer cautions Management against flouting the provisions of the Financial Regulation No.

46 of 2020.

The Committee further recommends that the Controlling Officer ensures that internal controls are enhanced and that all officers who flout the provisions of the Public Finance Management Act No.

1 of 2018 should be surcharged accordingly.


The Committee recommends that all documents in support of the submission are sent to the Auditor General for verification.

The Committee will await an update on the matter.

9.4.4 Unaccounted for Stores K627,589 The Controlling Officer submitted that observation by the Auditor General regarding unaccounted for stores, was noted and acknowledged.

She further submitted that disposal details amounting to K 134,082 had since been retrieved.
Additionally, poor record keeping was occasioned by a member of staff whose employment was terminated in 2020, due to professional misconduct in procurement and management of store.

61 She further submitted that efforts to retrieve the remaining disposal details were still being made and employment of stores management personal had been budgeted for.

The process had commenced following the delinkage of KMU from CBU.
The Controlling Officer further submitted that because KMU had a lean structure of management, a procurement officer was also handling stores in the absence of a stores officer.

She further submitted that the University had procurement details but lacked the disposal details.

Documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee reiterates its concern over how KMU was established and managed which led to a number of financial irregularities.
The Committee condemns the submission of documents after an audit exercise, as such documents are perceived to have been fabricated and not authentic.

The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification and further recommends that in an event that the outstanding disposal details are not traced; the matter should be reported to the Police for the officer in question to be pursued.
The Committee will await an update on the matter.

9.4.5 Failure to Withhold Value Added Tax K 284,319 The Controlling Officer submitted that the observation by the Auditor General regarding failure to withhold Value Added Tax was noted and acknowledged.

She further submitted that KMU was not appointed and provided with agency certificate for Withholding Tax.

Management had, however, been making follow-ups with suppliers to confirm remittance of VAT to the Zambia Revenue Authority.
In that regard, KMU had retrieved documents from three suppliers indicating their payment of VAT.

Committee’s Observations and Recommendations The Committee resolves to close the matter.

9.5 Administrative Matters – Failure to complete the Development of a Website The Controlling Officer submitted that the observation by the Auditor General regarding the failure to complete the development of the website was noted and acknowledged.
She further submitted that the University had employed and paid its students only to develop the website.

The purpose of employing students was to enable them to improve their web development skills, gain experience in website development, youth empowerment and reduce the cost of website development.
She further informed the Committee that at the time of the audit, the students had already finished designing the website which was in the process of validation and being populated by the ICT Unit to ensure that the information for the University was not comprised.

The Committee learnt that KMU ICT Unit only had two ICT specialists from CBU, who were attached to KMU.
Therefore, the process of populating the website with information and linking it to the student information system equally took longer to complete.

62 The Committee also learnt that the website was launched in November, 2021 and was operational as www.kmu.ac.zm.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, after which if there are no irregularities on the same query, the matter should be closed.
9.6 Asset Management 9.6.1 Failure to Secure Title Deeds The Controlling Officer submitted that the observation by the Auditor General regarding failure to secure title deeds and insure the buildings was noted and acknowledged.

She further submitted that the University had not yet been gazetted at the time of audit and therefore, title deeds and insurance could not be processed due to the inconsistence with the name of the University.
The Controlling Officer further submitted that after the audit, a Special Government Gazette No.

90 of Lusaka was issued (Portfolio 2) on 23rd September, 2021 and ascribed the name of the Institution as Robert Kapasa Makasa University.
She further submitted that due to the fact that there were structural changes to the governance system for the country, Kapasa Makasa University wrote to the Permanent Secretary for the Ministry of Education requesting to have the name Kapasa Makasa University gazetted instead of Robert Kapasa Makasa University.

The Controlling Officer further submitted that Management was actively following up the change of the name for the university.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee resolves to await an update on the acquisition of the title deeds and change of name.
9.6.2 Failure to Maintain Houses The Controlling Officer submitted that the observation by the Auditor General regarding failure to maintain houses was noted and acknowledged.

She further submitted that maintenance schedules for the whole campus had been prepared for repair and refurbishing.

Implementation had been slow due to limited finances.

The Committee learnt that the four dilapidated houses were left incomplete in the early 1970s when the facility was under the Ministry of Home Affairs.
The Committee also learnt that the University had renovated one house prior to the audit and planned to renovate more in future as and when funds permitted.

She further informed the Committee that the ministry had included an amount of K600 million in the 2022 budget towards infrastructure maintenance for all 63 properties under the supervision of the ministry and that KMU was allotted K42 million subject to approval by the Ministry of Finance and National Planning.
Committee’s Observations and Recommendations The Committee notes the response and recommends that the Controlling Officer ensures that maintenance schedules are maintained on an annual basis.

Additionally, the Committee recommends that the Controlling Officer should put in place a plan for rehabilitation of the four houses that were left incomplete by the Ministry of Home Affairs and Internal Security.
The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification and the Committee will await a progress report on the matter.

9.6.3 Failure to Re-drill a Borehole K 15,401 The Controlling Officer submitted that the observation by the Auditor General regarding failure to re-drill a borehole was noted and acknowledged.
She further submitted that a number of verbal reminders and visits were made to the Department of Water Resources to re-drill the borehole.

However, the Department failed to raise 50 per cent share contribution on the cost of fuel as per contract requirement.

Management acknowledged its failure in not having written to the Department of Water Affairs instead of verbal reminders and visits.
She further submitted that Management was committed to ensuring that the borehole was re-drilled after the rainy season in 2022.

The Controlling Officer further submitted that the matter had been resolved and the Department of Water Resources would drill the borehole after the rainy season.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission for verification.
The Committee will await an update on the re-drilling of the borehole.

9.6.4 Delayed Construction of a Laboratory K 2,899,788 The Controlling Officer submitted that the observation by the Auditor General regarding delayed construction of a laboratory was noted and acknowledged.

She further submitted that the contractor delayed completion of works due to escalating prices of materials and also due to some variations in the design.
The procurement and fitting of laboratory equipment would be carried out by Management once finances were available.

She further submitted that significant progress had been made and the project was expected to be completed and handed over by the end of June, 2022.
The Controlling Officer also informed the Committee that the University had budgeted to send K800,000 from internal generated funds and that they had further written to the Attorney General and the Secretary to the Treasury to seek authority to vary the contract and that a response was being awaited.

The Committee also learnt that delays arose due to the model of management as the contract was signed under CBU and the process of delinking also affected the completion of the project.
64 Committee’s Observations and Recommendations The Committee notes the response and resolves to await a progress report on the matter.

9.6.5 Delayed Construction of Water Reservoirs The Controlling Officer submitted that the observation by the Auditor General regarding delayed construction of water reservoirs was noted and acknowledged.

She further informed the Committee that the pipes were not buried because the water reticulation system was not tested as per contract requirement.
The Committee also learnt that the University did not pay the contractor in full before completion of the project as observed by the auditors.

Furthermore, the University had retained 10 per cent of the contract sum as defect liability.

The Committee learnt that the pipe system was tested and the trench for the pipe had been covered with the water system operating with very minor defects.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification after which if there are no irregularities on the same query, the matter should be closed.
9.7 Staff Related Matters 9.7.1 Failure to Recover Salary Advances K14,800 The Controlling Officer submitted that the observation by the Auditor General, regarding failure to recover salary advances within the stipulated timeframe was noted and acknowledged.

The Controlling Officer further submitted that all the salary advances had been recovered.

She further submitted that it was regrettable that auditors were not availed the documents relating to the recovery of salary advances at the time of the audit.
The Controlling Officer submitted that the Institution delayed in effecting recoveries on advances because the payroll was hosted by CBU at the time of audit.

The Controlling Officer assured the Committee that Management would ensure that documents related to recoveries of advances were available at all particular times when the auditors requested such proof.
The Controlling Officer further submitted that five salary advances involving six employees had been recovered while one which involved the employee who had been dismissed was yet to be recovered.

The University had failed to avail the documents as these were domiciled at CBU at the time of the audit as the staff in question were employees of CBU.
65 Committee’s Observations and Recommendations The Committee notes the response and directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will await an update on the matter.

9.7.2 Failure to Fill Key Positions The Controlling Officer submitted that the observation by the Auditor General regarding failure to fill key positions was noted and acknowledged.
The Committee learnt that KMU operated as a satellite campus of CBU with a lean staff structure and most functions were centrally managed.

Furthermore, KMU became autonomous on 4th June, 2021 and implementation of KMU employment structure had since started.

The Committee further learnt that the University failed to fill out key positions among them the Deputy Vice Chancellor; Registrar and Deputy Registrar; Chief Financial Officer; and Deans of Schools.
The Controlling Officer informed the Committee that Management would only employ the necessary staff when they were able to pay a salary.

Committee’s Observations and Recommendations The Committee notes the response and resolves to await an update on the matter.

9.7.3 Failure to Settle Outstanding Bills K 2,346,276 The Controlling Officer submitted that the observation by the Auditor General regarding failure to settle outstanding Bills was noted and acknowledged.
The Controlling Officer submitted that the member of staff in question, was not an employee of KMU and therefore, payment of terminal benefits for the individual was a responsibility of CBU because the person in question was employed by the Copperbelt University.

Committee’s Observations and Recommendations The Committee recommends that the Controlling Officer ensures that the outstanding bill is settled.

The Committee resolves to await a progress report on the matter.
10.0 LUANSHYA TECHNICAL BUSINESS COLLEGE: MINISTRY OF TECHNOLOGY AND SCIENCE An examination of financial and other records for the Financial Year Ended 31st December, 2019 and 2020 maintained at Luanshya Technical Business College revealed various irregularities to which the Controlling Officer responded as set out below.

10.1 Budget and Income The Controlling Officer submitted that the audit findings were acknowledged.
He further informed the Committee that the observation of the Auditor General that during the period under 66 review, the college recorded a negative variance of K9,480,749 in comparison to the budget of 27,077,797 was true.
The Controlling Officer further submitted that the variance was as a result of low enrolment levels due to the phasing out of the African Development Bank sponsorship; failure by sponsored students to meet their 50 per cent obligation; and closure of school during the Covid-19 pandemic in 2020, which led to reduced “terms‟‟ of learning from three to two and under funding by the Treasury in 2019.
He further informed the Committee that the ministry undertook efforts to engage the Treasury and documentary evidence was available for verification.

The Controlling Officer submitted that due to underfunding, the entity was unable to pay statutory obligations and to undertake capital projects.

Committee’s Observations and Recommendations The Committee observes, with concern, the negative effect of underfunding of the Institution on the operations of the college.
The Committee urges the Secretary to the Treasury to ensure that budgeted for funds are remitted to the respective entities, as failure to do so, has a negative ripple effect on the operations of the entity.

The Committee resolves to close the matter but keep it in view during future audits.

10.2 Accounting Irregularities 10.2.1 Failure to Collect Fees K990,271 The Controlling Officer submitted that the observations by the auditors were noted.
He further submitted that failure to collect fees was due to delayed remittance of bursary funds for Government sponsored students by Government Treasury.

Consequently, the Ministry of Education sent demand notices to the Ministry of Finance and National Planning regarding the amounts owed by Government sponsored students and the Ministry had since paid a total of K382,045.00.

The Ministry would clear the balance of K 605 226.00 by the end of February, 2022.
The Controlling Officer further submitted that the Treasury owed K 1,082, 000 under the skills development Fund.

Documentary evidence was availed for verification.

Committee’s Observations and Recommendation The Committee notes, with concern, the lack of correlation between the set objectives and the expected funding from the Ministry of Finance and National Planning.
The Committee further observes, with concern that in as much as there were arrears with respect to bursary payments, the monies in question were not budgeted for in 2022 Budget.

In this regard, the Committee finds the Controlling Officer‟s submission inadmissible and recommends that the Controlling Officer engages the Auditor General on the correct status on the query.

The Committee resolves to await an update on the matter.
67 10.2.2 Unsupported Payment Vouchers K83,209 The Controlling Officer informed the Committee that delayed issuance of receipts by suppliers of goods and services arose because the suppliers were not willing to issue receipts before clearance of cheques by banks.

He further informed the Committee that then suppliers were engaged and had since issued the receipts.

Payment vouchers with supporting documents were available for audit verification.
In addition, Management at Luanshya Technical and Business College wrote to caution the officers involved to ensure that receipts were collected upon issuing of cheques.

Committee’s Observations and Recommendations The Committee notes the response and finds it an unacceptable that the accounting officers could issue an accountable document without the supplier not acknowledging receipt of the cheque, in line with Financial Regulation No.

55 of 2020.
55 of 2020.

The Committee recommends that disciplinary action should be instituted against the officer in question, as opposed to merely cautioning the officer in question.

The Committee resolves to await an update on the matter.

10.2.3 Overpayment of Allowances The Controlling Officer submitted that the observation by the Auditor General was noted.
He further submitted that the allowances were sanctioned by the Board, which directed that 30 per cent should be retained by the College and 70 per cent to be paid to resource persons.

The Controlling Officer further submitted that the Conditions of Service referred to by the auditors did not apply to the staff (lecturers) in question.
The Controlling Officer submitted that Management had written to the officers involved for recovery of the overpayment and deductions from the officers had since been effected.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes, with disappointment the willful disregard of the conditions of service by the Board and Management.
While noting that deductions were being made to recover the funds, the Committee recommends that disciplinary action should be instituted against officers who failed to take appropriate responsibility, in accordance with section 52 (2) of the Public Finance Management Act No.

1 of 2018.

The Committee resolves to await an update on the matter.
10.3 Administrative Matters 10.3.1 Lack of Title Deeds The Controlling Officer submitted that the query arose due to delayed issuance of a plot number by Luanshya Municipal Council.

The Controlling Officer further submitted that the college first engaged the Council in 2019 for issuance of the correct plot number.
He further submitted that Management had been making follow-ups on the matter and the Council only held the full 68 Council meeting on 28thDecember, 2021 and the matter was tabled and approved for the issuance of the correct plot number.

Payment had been done for the re-plan fees and Management awaited issuance of the correct plot number from the Luanshya Municipal Council thereafter, the details would be submitted to the Ministry of Lands and Natural Resources for issuance of the title deeds.
Documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to ensure that all parcels of land belonging to the College are managed in accordance with section 41 of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification, upon which if there are no further irregularities on the same query, the matter should be closed.

10.3.2 Failure to Inscribe Government Assets K46,995 The Controlling Officer submitted that the query arose due to delayed response from the then Ministry of Works and Supply (MoWS) to inscribe the newly acquired assets.
He further submitted that the College invited the then Ministry of Works Assets Department to inscribe Government assets in question in 2020 and only responded in November, 2021.

The Controlling Officer submitted that the Ministry availed the required budget for the exercise to be conducted and the College had since mobilised resources and processed payments for the activity.

The inscription of assets had since been done.


The Controlling Officer submitted that Ministry of Works and Supply always had a schedule of activities and a respective budget.

However, when institutions invited them for an activity, which was not budgeted for, the entity in question had to cater for the expenses.

Committee’s Observations and Recommendations The Committee notes the response and condemns the laissez-faire management style.
The Committee is perturbed to note that management was reactive as opposed to ensuring that proper systems were put in place.

The Committee directs that all documents in support of the submission are submitted to the Auditor General for verification, upon which, if there are no further irregularities on the matter, it should be closed.

10.3.3 Failure to Remit Statutory Obligations The Controlling Officer submitted that the observation by the Auditor General was correct.
The Controlling Officer further submitted that the statutory obligations had not been remitted due to inadequate funding.

However, the college had started to liquidate the outstanding obligations for Zambia Revenue Authority, while with regard to National Pension Scheme Authority; the college was up to date with payments while a payment plan to liquidate the outstanding arrears for ZESCO had been formulated.
69 The Controlling Officer submitted that the payment plan was dependent on the funding from Treasury.

Furthermore, the college had been receiving grants but could not meet their daily operations in terms of monthly utility bills for ZESCO, water bill, internet services, training materials and salaries.

Committee’s Observations and Recommendations The Committee observes, with concern, the failure to pay statutory obligations which has continued to be a perennial challenge.
While noting the response, the Committee observes with concern, that in as much as there is a payment plan, the plan is dependent on government funding.

The Committee urges the Controlling Officer to ensure that the outstanding obligations are paid promptly to avert ligation.

The Committee will await an update on the matter.


11.0 MONGU TRADES TRAINING INSTITUTE: MINISTRY OF TECHNOLOGY AND SCIENCE An examination of financial and other records for the Financial Year Ended 31st December, 2020 maintained at Mongu Trades Training Institute revealed various irregularities to which the Controlling Officer responded as set out below.
11.1 Lack of Management Board The Controlling Officer submitted that the query arose due to delayed response from the constituents from where the board members should have been drawn and the administrative vetting by the Ministry of Technology and Science equally took longer.

The Controlling Officer informed the Committee that Management, through the Permanent Secretary had written to the Minister informing the Ministry about the expiry of the Board‟s tenure and that reminders were being done.
Documentary evidence was availed for verification.

The Controlling Officer submitted that the challenge was exacerbated by many people not wanting to serve on the Board as the remuneration or Board allowances were unattractive (Board Chairperson K1000, Vice Chairperson K950 and ordinary members K900 per sitting), especially for entities that where domiciled in far flung areas.

Furthermore, the Committee learnt that section 10 (2) of the TEVET Act No.
13 of 1998 was the founding provision and that it only specified the respective constituencies from which to appoint board members.

The Controlling Officer submitted that there was need to change the manner of identifying the board members and also to permit the respective entities to recommend people to the Minister.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to ensure that the proposal to have the entities propose the names of people to be appointed should be backed by law and in that regard recommended that the TEVET Act No.
13 of 1998, be amended to provide for a timeframe within which the appointments must be done and also to permit the affected entities to propose names which should then be submitted to the Minister for the due process of vetting to avoid having people being appointed from Lusaka.

The Committee will await an update on the 70 matter.
11.2 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the College recorded a positive variance of K2, 500,969 in comparison to its budget of K6, 165,890 was true.

The Committee also learnt that 90 per cent of the students were sponsored by the Government and that as such, in 2016 the Government owed the college monies which were paid in 2020, which led to a positive variance.
Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to ensure that under budgeting for the college is avoided.

The Committee recommends that the matter be closed but be kept in view for future audits.
11.3 Accounting Irregularities 11.3.1 Misappropriation of Funds - Production Unit i. Alteration of Receipts The Controlling Officer submitted that the observation by the Auditor General regarding alteration of receipts from K11,995 to K350 thereby defrauding the Institute of K11,645 by the Assistant Accountant was true and regrettable.

The Controlling Officer submitted that the officer involved was charged and made to pay back the total amount of K11, 995.00.
Furthermore, Management had enhanced the checks and balances to avoid such issues from arising in future.

This involved undertaking monthly reconciliations by the Principal and in the long term, the Institute would employ an Internal Auditor.

Furthermore, cash payments were no longer accepted by the Institute and all students and other customers were advised to deposit the fees at the bank.
The Controlling Officer submitted that the officer in question had been dismissed and as such, the matter was not reported to the police even though it was a criminal case.

Committee’s Observations and Recommendations The Committees takes note of the action taken and recommends that going forward, the Institute should ensure that matters that are criminal in nature, are reported to the Police and that familiarity should not be at the expense of ensuring that justice prevails.
The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General, upon which if there are no further irregularities on the same query, the matter should be closed.

71 ii.
71 ii.

Unaccounted for Revenue The Controlling Officer submitted that the observation by the Auditor General that out of K23, 575.00 realised from the sale of chickens, a total amount of K8, 395.00 was not accounted for in that the funds were not banked nor was cash found at hand was correct and regrettable.

The Controlling Officer submitted that Management had since enhanced the checks and balances to avoid such issues from arising in future.
The checks and balances involved monthly reconciliations by the Principal and in the long term, the Institute planned to employ an Internal Auditor to enhance controls.

In addition, Management had introduced random checks on the section responsible for revenue collection to counter such problems.

The Controlling Officer submitted that the queried amount was later accounted for and banked.
Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to ensure that Financial Regulation No.

134 is strictly adhered to and that disciplinary action should be meted out on the officer responsible.

The Committee directs that all documents in support of the query should be submitted to the Auditor General for verification.

The Committee will await an update on the matter.


11.3.2 Failure to Collect User Fees Mongu Trade Secondary School The Controlling Officer submitted that the observation by the Auditor General that during the period under review, the School did not collect amounts totalling K337, 145 was true.

The Controlling Officer submitted that the school only collected amounts totaling K242,291, leaving a balance of K94,854 uncollected, as at 31st December, 2020.
The Controlling Officer submitted that as at 30th September, 2021, the position had not changed.

The Controlling Officer further submitted that the school no longer charged school fees following the introduction of free education.

The Controlling Officer submitted that Mongu Trades School operated on a two-tier system, where pupils would attend skills and trade school after the normal curriculum teaching for primary and secondary school.
Committee’s Observations and Recommendations The Committee resolves to close the matter.

11.3.3 Unaccounted for User Fees The Controlling Officer submitted that the observation by the Auditor General, that out of K242,291 collected as user fees, a total amount of K25,848 could not be accounted for, in that the funds were neither banked nor was cash found on hand was true and regrettable.
The Controlling Officer further submitted that the query arose due to dishonest behaviour by the officer who accepted cash instead of bank deposit slips and misplacement the files.

He further submitted that the internal controls relating to collection of fees had been strengthened by 72 checking the work of the collector on daily basis and insisting on the fact that no one should pay cash but deposit in the Institute‟s bank account.
The entire K25, 848.00 had since been accounted for and the deposit slips and documentary evidence was availed for verification.

Committee’s Observations and Recommendations The Committee is disappointed to note the casual management style employed by the Institute and directs the Controlling Officer to caution Management against such laxity and to institute disciplinary action against the Chief Accountant who failed to take appropriate responsibility on the Accounting officer who was under his charge.
The Committee will await an update on the matter.

11.3.4 Failure to Tag and Brand Animals The Controlling Officer submitted that the observation by the Auditor General that thirty-four animals that is (25 goats and 9 cattle) whose value could not be ascertained, had not been tagged and branded with markings, as at 30th September, 2021 contrary to Clause 6 (1) of the Animal Identification Act No.28 2010 was correct.
The Controlling Officer submitted that the query arose because the Institute had legal restrictions in the process of acquiring brand marks since they required to be legally registered with the Ministry of Livestock and Fisheries.

He further submitted that all animals had been tagged and branded.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to desist from taking a reactive management style and only acting on administrative issues after an audit.

The Committee urges the Auditor General to verify the submission, upon which the matter should be closed.
11.4 Administrative Matters 11.4.1 Failure to Secure Title Deeds The Controlling Officer submitted that the query arose because of the bureaucracy at the Ministry of Lands and Natural Resources which caused delay in getting the Surveyors to give the quotation to survey the plots after numerous follow-ups.

The quotation was obtained and the payment to survey the plots had been made.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to engage his counterpart at the Ministry of Lands and Natural Resources.

The Committee urges the Controlling Officer to always ensure that matters are officially communicated, as opposed to depending on verbal follow-ups.

The Committee will await an update on the matter.


73 11.4.2 Failure to Remit Statutory Obligations The Controlling Officer submitted that the Institute had owed the National Pension Scheme Authority K305, 700.64 from 2008.

However, the debt was cleared in 2021.

He further submitted that the Institute owed Zambia Revenue Authority K17, 329.24 in terms of penalties and interest.

The Institute had requested for a waiver and this amount was determined after reconciliation of the Institute‟s account by ZRA.
The Controlling Officer submitted that ZRA had not responded at the time of reporting.

Committee’s Observations and Recommendations The Committee notes the response and resolves to await an update on the matter.
11.5 Staff Related Matters 11.5.1 Failure to Deduct National Health Insurance The Controlling Officer submitted that the observation by the Auditor General that the Institute deducted amounts totalling K2, 119,609 from thirty-eight officers without deducting health insurance contributions in amounts totalling K21, 196 contrary to the National Health Insurance Act No.

2 of 2018, was correct and regrettable.


He further submitted that the Institute was registered in June 2021 and had since been up to date with its account.

Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no further irregularities, the matter should be closed.
11.5.2 Weaknesses in Management of Salary Advances i. Non-Recovery of Salary Advances K 12,617 The Controlling Officer submitted that the observation by the Auditor General was correct and regrettable.

He further submitted that the query arose due to negligence by the officer in that he was not checking the salary advances registers.

He further submitted that the management of salary advance had been enhanced by the production of the salary advance register during payroll preparation.
The payroll would move with the salary advances register in all the offices where it had to be processed from.

The clause requiring deductions not to exceed 50 per cent was being reviewed so that it was in line with Government percentage of 60 per cent.

All salary advances had been recovered.

Documentary evidence was available for verification.
74 Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no further irregularities, the matter should be closed.

ii.

Payment to Officers with Outstanding Advances K 11,600 The Controlling Officer submitted that the observation by the Auditor General was correct and regrettable.
He further submitted that the salary advances were given to officers with previous outstanding advances due to social and economic problems affecting employees such as deaths and court cases.

The Controlling Officer further submitted that Management and the Union had agreed that this clause should be reviewed during the next bargaining meeting.

All advances had been recovered.


Furthermore, Management had since enhanced the implementation of the salary advance register, which would be signed both by the Human Resources Manager and the Accountant.

The Accountant was tasked to produce monthly reports on human resource issuances, recoveries and outstanding balances to be submitted to senior management meetings.
Committee’s Observations and Recommendations The Committee notes the response and cautions the Controlling Officer against non-adherence to the conditions of service.

The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and resolves to close the matter but keep it in view during future audits.
12.0 NATIONAL HEALTH INSURANCE MANAGEMENT AUTHORITY MINISTRY OF LABOUR AND SOCIAL SECURITY An examination of financial and other relevant records for the period from 1st July, 2019 to 31st December, 2020 maintained at National Health Insurance Management Authority, revealed various irregularities to which the Controlling Officer responded as set out below.
12.1 Budget and Income The Controlling Officer submitted that the observation of the Auditor General regarding the Authority‟s budget and income for the eighteen months period under review ended 31st December, 2020 was correct.

He further submitted that numerous efforts were expended through the Ministry of Health, which was the supervising Ministry at the time, to have the funds released to National Health Insurance Management Authority (NHIMA).
The Controlling Officer further submitted that out of the K18, 277,268, an amount of K 6,308,466 remained on disbursed by the Treasury due to financial constraints.

The Controlling Officer submitted that NHIMA required half a billion kwacha at its inception and that even if the budget had fully been funded, it would have accounted only for 19 per cent of its total budget.

The Committee learnt that this affected the roll out of the programme through 75 its project implementation strategy.
NHIMA was unable to procure the required IT system and employ the required staff.

The Controlling Officer also informed the Committee that the concept of NHIMA was that it had to complement the operations of the public hospitals and the former Medical Stores in the provision of health services.

In this regard, when NHIMA was formed, its Board also extended the registration of private entities to be accredited as service providers.
The Committee also learnt that NHIMA had required four months of operation for it to fully roll out its operations.

The Committee also learnt that NHIMA was not receiving any funding from the Ministry of Finance and National Planning as at the time of reporting.
Committee’s Observations and Recommendations The Committee observes, with concern, the failure to fully fund NHIMA at its inception which affected the effective roll out of the programme, which at the time of reporting had continued to impact the programme negatively especially in the rural areas.

The Committee observes, with concern, that in as much as the deductions are being effected on the pay slips of the accredited members, the members have continued to receive a poor service.
The Committee further observes, with concern, the criteria used to register private service providers, as the Committee is of the considered view that in as much as section 28 of the National Health Insurance Act No.2 of 2018 provides for the accreditation of service providers the Committee questions the manner in which the exercise is conducted as it leaves room for gentleman‟s agreements between NHIMA management and would be services providers.
The Committee urges the Auditor General to verify how this process is conducted and will await an update on the matter.

12.2 Weaknesses in the Management of Information and Communication Technology Systems 12.2.1 Lack of Governance Framework The Controlling Officer submitted that NHIMA was established from a modest position of no resources.

As such, Management only started with units and departments that interfaced with members, collections and health care facilities.
This was due to financial constraints.

However, with more resources, NHIMA had created an ICT Department that had been charged with the responsibility of designing and implementing an ICT Strategy.

The ICT Strategy would encompass the adoption and implementation of an appropriate ICT governance framework for governance, management and control of ICT systems.
The Controlling Officer submitted that the ICT strategy had since been developed and Management was reviewing the policy document which would be submitted to the Board once it was instituted.

76 Committee’s Observations and Recommendations The Committee notes the response and urges the Auditor General to verify the submission and the formulation of the strategy upon which, if there are no further irregularities on the query, the matter should be closed.
12.2.2 Questionable Implementation of ICT Solutions The Controlling Officer submitted that the Auditor General‟s observations were noted.

He further submitted that at the time, NHIMA needed to collect contributions at inception of the Scheme in October, 2019.

It was in this regard that NHIMA contracted Infratel to provide a temporary membership portal while procurement began for a more robust system.
The Infratel system was to ensure that public funds (contributions) for the Scheme which had just commenced were secure and properly accounted for; whilst a more robust system was being procured as it could not be immediately rolled out at inception mainly due to, amongst others the following reasons: i. ii.

lack of funds as NHIMA did not have seed money to begin the operationalisation of the Scheme.
NHIMA required kwacha equivalent of US$80,000.00 to support fundamental operating expenses to kick-start operations which was not availed by the Treasury; and a robust system would have required time to develop.

NHIMA did not have the time then, given that the Authority needed to start collecting contributions and consequently roll out the Scheme.
The Controlling Officer submitted that K 515,059, which was paid by NHIMA to Infratel was for purposes of the acquisition of the adhoc system, including housing the Authority ICT equipment, as NHIMA did not yet have the infrastructure such as servers, disaster recovery site, among others.

the the aforementioned, implementation of the various ICT systems had since been developed and awaited Board approval once the Hon.

Minister of Labour and Social Security appointed the NHIMA Board.
The Strategy which had been aligned with the Strategic Plan horizon of 2021 – 2025 set out to provide guidance in the three broad areas namely: the ICT Strategy guiding Notwithstanding i. ii.

plan the information systems strategy and technology architecture to meet NHIMA‟s business needs; implement ICT projects that would enable the business to improve efficiency of the business, reducing costs and delivering competitive advantage; and iii.
operate information systems so that they were fast, scalable, reliable, secure and ensure business continuity.

Documentary evidence was availed for verification.

77 Committee’s Observations and Recommendations The Committee notes the response, with concern, and is of the considered view that, while the formulation of NHIMA was perceived to be an emergency, there was no cause for the haphazard manner of implementation, which resulted in wasteful expenditure.
The Committee directs that documents in support of the submission should be submitted to the Auditor General for verification upon which if there are no further irregularities the matter should be closed.

12.2.3 Administration of ZSIC LIFE Contract/Engagement of ProBase Limited The Controlling Officer submitted that the Authority had noted the observation of the Auditor General.
He further submitted that there was no duplication between the ZSIC Life contract deliverables and the specifications that the eNHIMA, system that ProBASE installed.

The Controlling Officer submitted that Probase system was developed for the registration of members, and collection of member contributions.

The eNHIMA system was also designed for managing reconciliations of returns to contributions receipted.
For this to be done, a thorough system for the management of employer/member and contributions data had to be done.

This required the development of an employer and member registration module that was integrated into the underwriting module, and the payment module, which was the payment of contributions to the Scheme.

This feature was not part of the Terms of Reference (ToRs) in the ZSIC Life Contract.
Furthermore, the identified Probase solution addressed the following requirements which were not included in the TORs of the Enterprise Resourcing Planning (ERP) under ZSIC Life contract: i. ii.

iii.
iii.

access to ALL Banks, where minimal integration development was required between the parties in order to have optimal use; access to the One-Stop-Shop (OSS) that would give immediate access to the PACRA, NAPSA, ZRA and Ministry of Commerce databases for ease of compliance tracking on collections; ease of use for the customers.
It was apparent from feedback that customers were used to the NAPSA and ZRA systems and so with the following proposition there was limited change management interventions required; and iv.

the ease to move the compliance to the Informal Sector, which was a very strategic objective for the scheme.

The Probase system continued to differentiate these functions from the ERP and was fully integrated to pass over data processed to the Holistic Insurance Platform.
ZSIC Life Limited, as the consultant on the setup of the operational platform for the National Health Insurance Scheme (NHIS), provided for the Holistic Insurance Platform (HIP), which was the main underwriting software for the operational platform.

To segregate functions, contribution collections were managed on the Probase system, which was integrated with the 78 banks through Smart Pay and backwards to HIP as explained above.
Due to this integration, the HIP system was also required to have a membership module (for integration and underwriting purposes), a payment portal for payment of claims to health care providers and a benefit management module that was not part of the Probase System.

The NHIMA systems architecture was similar to other Authorities.

The Controlling Officer submitted that two systems performed two distinct functions and were developed for such functions without duplication.
In the same regard, the investment into the eNHIMA system generated sufficient value-for-money for NHIMA.

Committee’s Observations and Recommendations The Committee reiterates its observation on the perceived haphazard manner in which ICT systems were implemented.

The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, and if they are no further irregularities, the matter should be closed.
12.3 Operational Matters 12.3.1 Failure to Collect Accreditation Fees K288,578 The Controlling Officer submitted that the observation by the Auditor General with regard to the uncollected accreditation fees, amounting to K 288,578.50 out of ZMW 1,536,000.00, as at 31st August, 2021 was correct.
He further submitted that as at 19th January, 2022, the Authority had recovered a further K 56,660.50 bringing the total outstanding amount to ZMW 231, 918.00, representing 85 per cent recovery of outstanding accreditation fees.

The Controlling Officer further submitted that the slow recovery of accreditation fees was attributed to low levels of claims from Level 1 and 2 Health Care Facilities (HCF) against which the Authority set out to recover the accreditation fees.
Notwithstanding the above and as volumes of transactions increased in the district hospitals and a new enhanced tariff regime having been implemented, Management was confident to recover the said accreditation fees in full.

He further submitted that there was an increase in the price rate and the number of registered members.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and expresses disappointment that uncollected accreditation fees remain outstanding despite the implementation of the enhanced tariff and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the collection of all outstanding uncollected accreditation fees.
79 12.3.2 Failure to issue Biometric Membership Cards 1,131,705 The Controlling Officer submitted that the observation by the Auditor General was correct.

He further submitted that at the time of the audit the card printer was onsite and integrations with the system had been completed.

With regard to biometric harvesting, this commenced towards the end of November, 2021.

This was in readiness to go live on 1st December, 2021, after the successful integration of the card system.
From then on, the biometric harvesting exercises had continued with subsequent card printing and distribution being the focus of the card centre.

The Controlling Officer submitted that the Authority‟s interim strategy with regards biometric harvesting was to setup harvesting desks at both public and private institutions to capture their employees for the purposes of card production.
This was being done before the provincial offices began to serve as points for biometric harvesting and card distribution to the general public.

The tabulation below highlights the detailed card production numbers from harvesting, printing and distribution from the date of inception to the time of reporting.
CARD PRODUCTION Institution Zamleather / Zamleather/ZamShu Acacia Food & Beverages Cabinet Office Freight and Passengers Zambia Novatek Tsogo Group (Southern Sun/Stay Easy) BDO Zambia Vertigo Properties National Assembly Total Actual Harvested 222 228 201 102 427 143 79 35 296 1733 Cards Printed 221 223 201 102 427 143 79 35 295 1726 Cards Distributed 221 223 153 102 427 1126 Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all the documents in support of the submission upon which, if there are no further irregularities on the query, the matter should be closed but kept in view for future audits.
12.3.3 Unregistered Members The Controlling Officer submitted that the observation of the Auditor General was noted and agreed to.

The Controlling Officer further submitted that while the observation was noted, comparing the performance of NHIMA at two years with that of the Zambia Revenue Authority, which had been in operation for significantly longer than NHIMA would appear incorrect.
He 80 further submitted that notwithstanding, the Authority was unable to meet its registration target on account of limited access to the informal sector due to COVID 19 restrictions.

Management had since met the expected target and membership of the Scheme, as at 31st December, 2021 was 1,277,960.
The Controlling Officer further submitted that, the informal sector registrations had begun, in collaboration with other social security agencies, among them National Pension Scheme Authority and Workers Compensation Fund Control Board.

In addition, NHIMA had begun the on-boarding of the poor and vulnerable under the Social Cash Transfer Programme, working with the Ministry of Community Development and Social Services.
The Controlling Officer submitted that the information which was on the ZRA database was not the correct one that the Authority required.

The Controlling Officer further submitted that the Authority was working on modalities to be part of the Integrated National Registration Information System (INRIS).

The Committee also learnt that 100,000 members were registered from the informal sector.
Committee’s Observations and Recommendations The Committee notes the response but expresses concern on the challenge of registering members.

The Committee is of the considered view that this query arose as the Authority did not have a robust ICT system in place and that it was working in reverse hence the challenges of failure to register members and non-issuance of biometric membership cards.
The Committee urges the Auditor General to verify the submission and will await an update on the registration of the un-captured members.

12.3.4 Lack of a Debt Collection Policy The Controlling Officer submitted that the observation by the Auditor General with respect to lack of a Debt Collection Policy was correct and noted.
The Controlling Officer further submitted that in view of the Auditor General‟s recommendations and the need to secure the sustainability and solvency of the National Health Insurance Scheme “the Fund” through effective debt management, the Authority had since drawn up a Debt Management Policy which had since been reviewed and approved by the NHIMA Executive Committee (ExCo) and awaited the approval of the Committee of the Board and NHIMA Board, once appointed by the Minister of Labour and Social Security.
The Controlling Officer submitted that the Authority was using eNHIMA to identify those who owed and when to collect.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and observes that in as much as the Authority has a draft debt collection policy, the Authority is owed uncollected funds from the accredited members and that the system does not help to clearly outline how the system identifies the entities which owe, how and when they should pay.
The Committee directs that the Authority should put this system in 81 place and ensure that the Debt Collection Policy is implemented expeditiously.

The Committee will await an update on the matter.

12.3.5 Payment of Claims Advance Payments to HealthCare Providers without Capacity to Pay Back K 2,602,623 The Controlling Officer submitted that the observation by the Auditor General with respect to Clauses 3.5, 3.6 and 3.7 of the NHIMA Claims Advance Payment Concept Note was correct.
He further submitted that it was, however, regrettable that some facilities had lower than anticipated claims to offset Claims Advance Payment (CAPS) paid.

Notwithstanding the aforementioned, they had continued to amortise CAPs against claims.

However, given the low amortisation rate, once fully amortised the Authority would, base future CAPs disbursement on the Average Based Claims model instead of the current Grant Based CAP which would, enable match CAP disbursements with amortisation capabilities.
Additionally, the Authority would engage in capacity building training for healthcare providers in claims processing and reporting.

Furthermore, the Authority was exploring different payment mechanisms for healthcare providers that had limited capacity as identified.

Committee’s Observations and Recommendations The Committee notes the response and urges the Auditor General to verify the submission and will await an update on the matter.
12.4 Accounting Irregularities – Unretired Funds K1,176,386 The Controlling Officer submitted that the unretired amounts amounting to ZMW 1,176,386.00 were paid by the Ministry of Health and the expenses were recognised into the Authority General Ledgers at the beginning of the Scheme as they were incurred by the Ministry of Health on behalf of the Authority.
Controlling Officer submitted that the Authority had no control over the payments, as these funds were presided over by the Controlling Officer in the Ministry of Health and paid out from the Treasury Single Account domiciled at the Bank of Zambia, which Account was operationalised through Ministry of Finance.

This matter had since been brought to the attention of the Controlling Officer in the Ministry of Health, as it required urgent retirement of the Public funds in mention.
The Controlling Officer further submitted that the Ministry of Health had since submitted all the relevant retirement documents with respect to the amount in question.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes, with disappointment, that the Authority only reacted to the query, which was only done in January, 2022, when they had been queried in September, 2021.
The Committee urges the Controlling Officer to institute disciplinary action on all the officers and substantive supervisors who failed to take responsibility at the required time.

The Committee 82 further directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and will await an update on the matter.
12.5 Staff Related Matters 12.5.1 Irregular Conditions of Service–Payment of Gratuity K223,200 The Controlling Officer noted the observation by the Auditor General with respect to payment of irregular conditions of service and payment of gratuity.

The Controlling Officer submitted that the Authority operated in line with the resolutions of the Board, which was anchored on the provisions of sections 73 (1) and 104 of the Employment Code Act No.

3 of 2019.
3 of 2019.

The Controlling Officer further submitted that the Authority was of the considered view that labour laws only set the minimum standards and it was left to employers and employees to agree on what was payable under the contract of employment or under a collective agreement, in the case of a unionised setting as dictated by the employer‟s ability to pay.
He further submitted that in the case of the four employees, their contracts of employment provided for payment of the gratuity at the rate of 30 per cent of basic salary and allowances earned during the contract period as approved by the Board.

The Committee learnt that the budget for the year, which included the provision of the gratuity, as contained in the contracts of employment and Conditions of Service was approved by the Board.
In light of the above, the payments were, therefore, in line with the contracts of employment, conditions of service and as per approved budget.

Committee’s Observations and Recommendations The Committee observes, with concern, NHIMA‟s practice of including allowances in the calculation of gratuity, which is at variance with what is provided for in the statutes and that there is no legal document informing their decision.
Furthermore, the Committee notes that in as much as the Board had approved the decision and that contracts have a legal implication in an event that the Authority rescinds its decision, the Committee recommends that this anomaly must be resolved expeditiously.

The Committee further urges the Secretary to the Treasury to promptly intervene in the matter to ensure that the misunderstanding is resolved.
The Committee further recommends that the funds in question should be recovered in an event that the Authority is found to have erred.

The Committee will await an update on the matter.

12.5.2 Questionable Procurement of Personal to Holder Motor Vehicles The Controlling Officer submitted that the views of the Auditor General were noted.
Management on the other hand, proceeded to implement the Vehicle Policy, as part of the whole Conditions of Service approved by the Board of NHIMA as Management reported to the Board and not any other layer of authority.

This option was more cost saving to NHIMA and public finances than the Civil Service Microfinance Scheme.

The possibility of amending contract provisions could also be more costly to NHIMA, further negating the cost saving measures the circular intended to achieve.
83 The Controlling Officer further informed the Committee that the Cabinet Circular of 2015 which was referenced in Cabinet Circular No.17 of 2016 and Cabinet Circular No.

1 of 2021 was not directed at Boards or Heads of Statutory bodies, but rather to the Civil Service.

In light of this, it was important to note that, had the Board of NHIMA elected to implement the policy directives under the Cabinet Circular No.
1 of 2021 (particularly to alter contracts of employees), there were certain legal and financial ramifications which had to be considered.

From the outset, it was important to point out that it was the function of the Board of Authority which represented government, to among other things, review the Authority policies; provide strategic direction; approve the annual plans and budget; approve the acquisition of property and oversee the operations of the Authority.
The conditions of service was one such policy that the Board of NHIMA approved.

Under the said Conditions of Service, officers of salary grades NHA 01 to NHA 03 were entitled to personal-to-holder motor vehicles in accordance with the Motor Vehicle Policy, as approved by the Board.

The entitlements had been reflected in the contracts of all the eligible NHIMA employees in compliance with the Board policies.
The Committee heard that at law, an employer could not unilaterally and without the consent of the employee, alter the employee‟s contract of employment to the detriment of an employee.

Therefore, any action by the Board to alter contracts of employment, as directed in Circular No.

1 of 2021, would be deemed as a unilateral termination of contracts, which could result in several lawsuits for which the Authority would incur costs as directed by the Courts.
Amendment of the conditions of service and the Motor Vehicle Policy by the Board in retrospect would not only affect the contracts of employment, but would be illegal, as the law only permitted acting in retrospect to confer a benefit and not take away what had been lawfully given by both policies forming an integral part of the contracts of employment.
The Controlling Officer further submitted that an analysis of Clause F of the 2015 Cabinet Circular revealed that the abolishment of the Personal-to-Holder Policy was directed at Public Service Officers (i.e., those who are in Public Service and drew expenses from the National Treasury).
However, a look at Article 266 of the Constitution of Zambia revealed that Public Service and Public Officers are defined as follows: “Public officer” means a person holding or acting in a public office, but does not include a State officer, Councillor, a Constitutional office holder, a judge and a judicial officer; “Public service ” means service in the Civil Service, the Teaching Service; Defence Force and National Security Service; the Zambia Correctional Service; the Zambia Police Service; Emoluments Commission; State Audit Commission; Lands Commission; Electoral Commission; Human Rights Commission; Gender Equity and Equality Commission; the Anti-Corruption Commission; Drug Enforcement Commission; the Anti-Financial and Economic Crimes Commission; the Police and Public Complaints Commission; and service as a constitutional office holder, service in other offices, as prescribed.
The Committee also heard that the Constitution did not define employees of statutory bodies as either Public Service workers or Public officers.

Therefore, the policy directives under Cabinet 84 Circular of 2015, could not be extended for application to NHIMA employees, who belonged to a statutory body.

Parliament had legislated and given the Authority autonomy within the powers given in the National Health Insurance Act No.

2 of 2018.
2 of 2018.

Equally, NHIMA employees did not qualify for the said Public Service Motor Vehicle Loan Scheme, as per Article 266.
Committee’s Observations and Recommendations The Committee notes the response with respect to the legal implications that may ensue and therefore, urges the Secretary to the Treasury, the Secretary to the Cabinet and the Auditor General to clarify this matter especially with respect to Government circulars, to which constituents they are addressed, and how they should be treated when they contradict any established law.
The Committee further recommends that the matter with respect to the contracts should be reported to the Attorney General.

The Committee will await an update on the matters.

12.5.3 Failure to Adhere to Directive arising from the First Meeting of Permanent Secretaries The Controlling Officer submitted that the Authority was given one Land Cruiser GX V8 model, by the Ministry of Health on 13th June, 2019, pursuant to the creation of NHIMA.
This motor vehicle was given for use by the Office of the Director General.

This was after the Management Meeting of the Permanent Secretaries held on the 31st May, 2019.

The Ministry had requested for the vehicle back in 2021 and it was reallocated within the Ministry of Health.

The Authority, before returning the vehicle, procured a similar vehicle as a duty vehicle for the Office of the Director General.

This was done pursuant to the approved Motor Vehicle Policy.
It was Management‟s position that there was no loss of funds as the Authority had budgeted for this procurement and the NHIMA Board had approved both the 2020 Budget and the Motor Vehicle Policy.

The Controlling Officer further submitted that pursuant to the approved Conditions of Service, Motor Vehicle Policy; the Budget, and signed contract, the Authority was on firm ground to purchase the said vehicle GRZ 423 CV for the Director General‟s Office.
The Authority was bound by decisions of its Board, who were its highest governance body.

Legal decisions and resolutions of the Board were binding on the Authority, whereas documents not endorsed or approved by the Board were merely informative on the trend in the Civil Service.
Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need for the Secretary to the Treasury and the Secretary to the Cabinet to resolve the issue surrounding the misunderstanding on Government Circulars.

The Committee will await a progress report on the matter.

12.5.4 Unfilled Key Positions The Controlling Officer submitted that at the inception of the Authority, the Board had approved a one-year inception plan for Management execution.
For human resource and staffing, only twenty-one positions were approved to assist with the initial set up processes of the Scheme.

85 Recruitment and filling of these positions was dependent on the availability of funds for personal emoluments and tools for the staff to use, such as office space, workstations and computers.

The Scheme only started collecting funds from its members in October, 2019, following the issuance of Statutory Instrument No.

63 of 201, which prescribed the operating guidelines.
Only few employers had been registered at the time and therefore, the funds were inadequate to cater for large scale operations.

In terms of the National Health Insurance Scheme Act No.

2 of 2018, only 10 per cent could be allocated to the Authority for administration.

The Authority could, therefore, not recruit all positions because of constraints with the funds, given that that the Treasury had not made any seed capital injection to support the start-up of the Scheme.
The Authority had since formulated a Strategic Plan which spanned from 2021 to 2025.

Management was actualising the provisions and targets of the plan which included recruitment and filling of critical positions such as inspectors.

At the time of the audit the internal administrative processes to recruit had been secured and works had commenced to fill the positions.

Five Compliance Officers had since been employed and were discharging their duties as per their job descriptions.
In terms of inspectors, the Authority had since interviewed and would be recruiting a Manager in charge of facilities inspections and audits.

Both the Manager and other inspectors were due to report in quarter 1 of 2022.

The Controlling Officer submitted that all the key positions had since been filled and documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all the documents in support of the submission, upon which if there are no further irregularities on the query, the matter should be closed.
13.0 NATIONAL HOUSING AUTHORITY: MINISTRY OF INFRASTRUCTURE HOUSING AND URBAN DEVELOPMENT An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020, and physical inspections of selected stations, revealed various irregularities to which the Controlling Officer responded as set out below.
13.1 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the National Housing Authority (NHA) had a negative variance of K 304,723,101 against its budget of K 551,037,805 was correct.

He further submitted that the query arose because NHA could not achieve the budgeted income during the period under review due to the fact that a number of activities that had been budgeted for execution could not commence as planned.
86 The Controlling Officer further submitted that during the period under review, the Authority recorded negative variances of K 67,422,952 in 2018, K 29,361,551 in 2019, and K 203,938,598 in 2020.

He further submitted that these variances arose due to delays in conclusion of contract negotiations and, delays in the commencement of works among other variables.
The Controlling Officer submitted that to resolve the query, the Ministry of Housing and Infrastructure and Urban Development, had resolved to be realistic and exercise prudence in the budgeting process based on lessons learnt from past performance.

The following corrective actions had been implemented by the inclusion of: i. revenue figures from projects that were ongoing and ready to commence (contract signed or payments received).

ii.
ii.

revenue figures from sales of properties based on past performance levels.

iii.

inter departmental charges shall not be included in the budgeted figures.

iv.

activities to be based on realistic assumptions.

In addition, NHA would ensure it executed activities in line with the budgeted plan in order to realise the budgeted income.

Committee’s Observations and Recommendations The Committee notes the response with sadness.
The Committee observes that NHA has continued to record a deficit on its budgeted revenue.

The Committee further notes that in the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2017, NHA had a variance of over 60 per cent between the the budgeted for revenue and what was eventually realised.

The Committee observes that the trend is the same in the Audit Report for the Financial Year ended 2020.
The Committee urges the Controlling Officer to enhance supervision of the Authority to ensure that it is achieving its set benchmarks.

The Committee will keep the matter open and in view of future audits.
13.2 Failure to Submit Annual Reports and Audited Financial Statements The Controlling Officer submitted that the Authority failed to submit audited reports for the years 2018 to 2020, due to the delayed release of the finalised reports by the Office of the Auditor General for the financial years ended 31st December, 2015 to 2017.

The audited financial statements were received in April, 2021.

He further submitted that the audited financial statements for the years 2018 and 2019 were ready.
The audit for years 2020 and 2021 was in process and the audited financial statements would be produced in due course.

The Annual reports for the years 2015 to 2020 were being consolidated and would be ready by the end of the year 2022.

From the year 2022, NHA would ensure that both the audited financial statements and Annual Reports were released within the prescribed period.
87 Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General, upon which if there are no further irregularities on the query, the matter should be closed.
13.3 Operational Matters 13.3.1 Failure to Produce Annual Housing Report The Controlling Officer informed the Committee that NHA did not produce the Annual Housing Report due to the postponement of the National Census on Population which formed the basis of reliable and authentic data to be included in the report.
The Controlling Officer further submitted that a draft annual housing report had been prepared using secondary data as recommended by the Committee on Parastatal Bodies in its Report for the Fourth Session of the Twelfth National Assembly.

The Controlling Officer regretted that there was a delay in producing the report as the Authority had to authenticate the data collected from secondary sources.
The Controlling Officer further informed the Committee that an enhanced and finalised annual housing report would be dependent on the National Statistical Census report that would be produced by Zambia Statistical Agency.

The Report was scheduled to be ready by December, 2022.

Committee’s Observations and Recommendations The Committee notes the response and will await a progress report on the matter.
13.3.2 Failure to establish Housing Revolving Fund The Controlling Officer submitted that the observation by the Auditor General with respect to failure to establish a housing revolving fund, as cited in the Report of the Auditor General for the Financial Year Ended 31st December, 2017 was correct and regrettable.

He further submitted that NHA planned to establish a housing revolving fund based on funds to be realised from the sale of houses on a rent-to-own scheme to public workers.
In addition, NHA planned to raise short term financing through the issuance of a Revolving Commercial Paper Programme (RCPP).

Negotiations between Government and NHA, on the rent-to-own scheme, were not concluded mainly due to the fact that the raising of project funding was conditional upon the availability of Government sovereign guarantee.

The RCPP was not actualised due to the escalating interest rates on borrowings which would have in turn made the houses unaffordable.
The Controlling Officer further submitted that NHA had continued engaging Government on alternative means of financing projects; such as Public Private Partnerships (PPP) considering that the Government had suspended issuance of sovereign guarantee.

NHA had also developed a Concept Note to deliver affordable housing for Public Service workers on a rent-to-own housing scheme.

The realised funds from the project would go towards the revolving fund.
88 The Controlling Officer submitted that NHA had advertised for a PPP through Zambia Development Agency and they were working on a bidding document.

The Authority was confident that it had parcels of land and properties which it would offer to would be PPP partners.
Committee’s Observations and Recommendations The Committee notes, with concern, the failure by NHA in the past to establish a Housing Revolving Fund in accordance with section 19(2)(k) of the National Housing Authority Act, Chapter 195 of the Laws of Zambia, which mandates the Authority to provide finance for housing programmes throughout the Republic for delivery of decent, affordable and sustainable housing.
The Committee directs the Secretary to the Treasury to intervene in the matter to find a lasting solution and ensure that the query does not recur.

The Committee will await an update on the matter.

13.4 Administrative Issues-Asset Management 13.4.1 Failure to Collect Rental Income K17,651,977 The Controlling Officer submitted that the observation by the Auditor General with respect to uncollected rentals totalling K 17, 651, 977, as at the time of reporting, was correct.
He further submitted that NHA was unable to collect K14,595,876.56 from its defaulting tenants.

Most of the tenants were Small and Medium Enterprises (SMEs) whose cash flows were affected by the economic downturn.

To resolve the query, NHA had undertaken efforts not limited to those listed hereunder: i. engaged certified bailiffs to pursue delinquent debts; ii.

increased manpower levels in Debt Management Unit; iii.

iv.
iv.

instructed the Legal Department to actively pursue deserters, and had so far recovered K841,322.43 through court processes; and engaged Ministry of Finance and National Planning on debt owed by Government institutions amounting to K862,865.31.

He further informed the Committee that NHA would also undertake the measures listed below to ensure that revenue from the rent was guaranteed.

i. ii.

Change and enhance the process of admitting new tenants into the commercial office spaces.
Subject prospective and existing tenants to clearance from Credit Reference Bureau (CRB).

iii.

Engage defaulters on payment plans for outstanding rentals.

89 iv.

Give eviction notices to defaulters who accumulated rentals beyond a quarter.

Committee’s Observations and Recommendations The Committee notes the response with concern, in that NHA had to wait for the uncollected rentals to escalate to K17 million for them to propose the remedial measures, which the Committee finds unacceptable.
The Committee recommends that the Controlling Officer prevails on Management to consider changing the use of Findeco House; Indeco House; Zimco House; and Kulima Tower, which accounted for K 12.7 million of the outstanding rentals, so as to improve the collectability of rental income.

The Committee will await a progress report on the collection of the outstanding rentals.
13.4.2 Failure to Effect Direct Payroll Deductions - Sale of Housing Units to Ministry of Finance Staff K33,200,500 The Controlling Officer submitted that the observation by the Auditor General that at the time of reporting K372,448 had not been collected from twenty officers and that the direct payroll deductions had not been effected, hence the officers were paying on their own was correct.
The Controlling Officer further submitted that the contract of sale provided options of payment methods which were direct payroll deductions, cash payment or personal direct bank transfers.

The beneficiaries of the houses opted to remit their payments through direct debit and cash, as the payroll deductions were not effected by the Ministry of Finance and National Planning.
The Controlling Officer submitted that NHA had engaged the Ministry of Finance and National Planning to introduce payroll deductions from staff salaries and remit to NHA to prevent defaulting on payments from individuals.

In this regard, the Ministry had not committed itself to effect payroll deductions but had instead committed to engage officers to meet their obligations.

The amount of K372,448.00 had since been cleared.


In addition, NHA would continue to engage individual purchasers to ensure that payments were up to date.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee notes that NHA has been engaging the Ministry of Finance and National Planning to effect deductions from the purchasers‟ emoluments to which the Ministry has not been agreeable.
The Committee notes that NHA prefers to have the deductions from source, as the collection of revenue is guaranteed.

In this regard, the Committee urges the Controlling Officer to re-engage the Secretary to the Treasury on the matter and also urges the Treasury to consider adopting the proposal by NHA which would help improve NHA‟s liquidity position.

The Committee will await a progress report on the matter.
13.4.3 Poor Maintenance of Investment Properties The Controlling Officer submitted that NHA did not carry out major maintenance works due to financial limitations.

He further informed the Committee that the commercial buildings in 90 question, were old and required colossal sums of funds to put them in tenantable state.

The estimated cost to put all buildings in good standard was K100 million.
To resolve the query, NHA was attending to minor repairs and maintenance works according to availability of finances and this was an ongoing exercise.

Some of the works that had been embarked upon included the following: i. Findeco House (Lusaka) The faulty water faucets were being fixed and the exercise was earmarked to be completed by the end of the second quarter of 2022. ii.

Findeco and Indeco Houses (Lusaka) The non-functional urinal and toilet flushing system were worked on.
However, the complete plumbing system would be worked on as funds permitted.

Furthermore, the work was in progress on the false roof to rectify the cracked old bituminous surface and leakages.

iii.

Findeco and Zimco Houses (Lusaka) Cracked surfaces on the mezzanine floor remedied.

Remedial works to be carried out on the 1st and 23rd floors (Findeco) and 12th floor (Zimco) to be carried out in June, 2022. iv.
Findeco House (Solwezi) The toilets which were reported as poorly maintained had been maintained and new manhole covers were constructed to replace the stolen ones.

The make-shift stand was constructed by NATSAVE, as additional convenience facilities for its customers.

The new tenant, Unity Finance Limited, had since taken it over as a storeroom.

v. Findeco House (Chipata) The Controlling Officer submitted that works shall be undertaken in the second quarter of 2022.
NHA was developing a five-year maintenance plan in line with the maintenance policy to respond to rehabilitation and refurbishment works to the commercial buildings in a phased approach.

In addition, NHA had also commenced the engagement of partners for redevelopment of the commercial properties through PPP agreements.

The Controlling Officer submitted that a turnaround strategy had been drafted by NHA and submitted to the Ministry for consideration.
The Committee also heard that the Ministry was reviewing the National Housing and Authority Act Chapter 195 of the Laws of Zambia to ensure that the Act was responding to new trends and would make NHA to be an authority on matters of housing management and enhance the regulatory function and improve the revenue base.

91 Committee’s Observations and Recommendations The Committee notes with dismay, the poor maintenance of the properties under NHA.
The Committee urges the Controlling Officer to ensure that the turnaround strategy is implemented expeditiously and that the review of the National Housing and Authority Act Chapter 195 of the Laws of Zambia should expeditiously be done.

The Committee will await a progress report on the matter.
13.5 Staff Related Matters 13.5.1 Failure to Remit Statutory Contributions K249,498,128 The Controlling Officer submitted that NHA did not remit the statutory contributions due to financial challenges resulting from the depletion of the revenue base from the sale of housing units to sitting tenants at discounted prices, following the Presidential Housing Empowerment Programme.

Further, NHA did not source for adequate projects to cover up for the deficit and financing gap caused by the sale of houses.
He further submitted that NHA had been engaging Government, through the Ministry, to assist it in settling the statutory contributions as set out below.

i.

National Pension Scheme Authority Principal contributions amounting to K14,500,000.00, had since been settled after Government funding was released in December, 2021.

NHA had commenced negotiations for the waiver on the accumulated interest and penalties.

ii.
ii.

Workers Compensation Fund Control Board NHA had offered to clear the outstanding debt using plots in Kafue on a debt for land swap.

The Authority was awaiting response.

iii.

Local Authority Superannuation Fund NHA had engaged Local Authorities Superannuation Fund Superannuation (LASF) and presented proposals for project development which could be used as debt swap for the outstanding debt.

Payment plans had been put in place to settle the outstanding balance.

iv.
iv.

Zambia Revenue Authority NHA had engaged ZRA and Ministry of Finance and National Planning MoFNP on the clearance of the debt.

The statement of accounts for amounts owed by Government institutions had been submitted to MoFNP for verification for the purposes of using the outstanding debt to offset the debt with ZRA.

ZRA was yet to verify amounts collected from various institutions which were agents mandated to Withhold Value Added Tax (WVAT agents) through garnishee orders.
The waiver of penalties and interest shall be discussed after the above exercises were completed.

92 Committee’s Observations and Recommendations The Committee notes the Controlling Officer‟s submission with concern, considering that the query has continued to recur as noted in the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 2017.
The Committee acknowledges the financial challenges NHA is grappling with but recommends that statutory obligations must be remitted without delay as they are mandatory.

The Committee strongly urges the Controlling Officer to follow through the set-out plans and will await a progress report on the matter.

13.5.2 Outstanding Gratuity Payments K3,902,311 The Controlling Officer submitted that NHA failed to clear accrued gratuities due to liquidity problems.
To resolve the query, NHA had been dismantling gratuity based on the availability of funds.

The sum of K119,762.87 was settled in the last quarter of the year 2021, reducing the liability to staff from K3,902,311.00 to K3,782,548.13.

Committee’s Observations and Recommendations The Committee notes, with concern, the continued appearance of the query on failure to settle gratuities which have continued to arise in the Reports of the Auditor General.
The Committee urges the Controlling Officer to ensure that a permanent solution is formulated and that NHA should consider placing its staff on permanent and pensionable basis, as opposed to having contracts tied to payment of gratuity.

The Committee further recommends that the Controlling Officer ensures that the remaining balance is paid expeditiously.

The Committee directs the Controlling Officer to submit all documents supporting the submission to the Auditor General for verification.
The Committee will await an update on the clearing of the outstanding balance.

14.0 NATIONAL SCIENCE AND TECHNOLOGY COUNCIL MINISTRY OF SCIENCE AND TECHNOLOGY An examination of the financial and other records for the Financial Years Ended 31st December, 2019 and 2020 maintained at the National Science and Technology Council (NSTC) revealed various irregularities to which the Controlling Officer responded as set out below.
14.1 Governance 14.1.1 Operating without a Council/Board The Controlling Officer submitted that the Ministry of Technology and Science (Ministry of Higher Education then), had gone through the process of putting the Council in place up to the point when the Cabinet Memorandum was presented in Cabinet.

Unfortunately, Cabinet did not approve the Council composition because it did not meet the gender parity.

Of the thirteen nominated members, only one was female.
Cabinet also did not approve some names because they were below the rank of Assistant Director which could pose a problem with regard to decision making.

The Ministry had started the process of getting new nominations for the 93 affected sectors but the process stalled when Parliament was dissolved.

However, the Ministry of Technology and Science had started the process of appointing the Council and was receiving nominations as at the time of reporting.
The Controlling Officer further submitted that it was regrettable that the proposed nominations did not meet the set criteria and that the Ministry depended on the constituents to provide the names to be submitted, within a specified timeline but the Ministry had no control with respect to the time the constituents responded.

He further informed the Committee that the constituents were informed through correspondences even though the Science and Technology Act No.
26 of 1997 did not spell the specific requirements.

Furthermore, there was a challenge with respect to finding females who were in the field of science.

Committee’s Observations and Recommendations The Committee notes, with concern, the failure by the Ministry to take a proactive approach, to appoint Board members immediately after the expiry of the Board‟s tenure.

The Committee further observes that the Science and Technology Act No.
26 of 1997does not clearly spell out the specific requirements for the nominees; to be included in the Council which affected the kind of nominees who were submitted to the Ministry for consideration.

The Committee is also saddened that there is a challenge with meeting the gender parity as there are few women in the field of science.
In this regard, the Committee recommends that the Act should be reviewed so that it clearly spells out the requirements, and also the timelines within which the constituents should promptly respond to the Ministry.

The Committee will await an update on the matter.

14.1.2 Lack of a Board/Council Charter The Controlling Officer submitted that the observation by the Auditor General that the Council had no Board Charter was correct.
He further submitted that the Council had never had a Board/Council Charter since its establishment.

The Controlling Officer submitted that the previous Boards and the supervising Ministry did not insist on the formulation of Board Charter.

The Controlling Officer further submitted that the Council had started developing the draft Council/Board Charter which would be presented to the Council for consideration and approval once it had been appointed.
The Controlling Officer submitted that in the absence of the Charter, the previous Boards drew their roles and responsibilities from the Act.

Committee’s Observations and Recommendations The Committee observes, with dismay, that the Council has never had a Charter, which is an important policy document to aid in providing policy direction and supervision of the Council.

The Committee directs that the Charter should be formulated expeditiously as it is an important corporate governance tool.
The Committee will await an update on the matter.

14.1.3 Failure to Provide Minutes of Council Extra Ordinary and Board Meetings The Controlling Officer submitted that the observation by the Auditor General with regard to missing minutes for eight extra ordinary meetings that were held resulting in an expenditure of K 94 94,640 as sitting allowances was noted.
He further submitted that the minutes were misplaced and that only four extra ordinary meetings took place as opposed to eight, during the stated period.

He further submitted that a system had been put in place which safe guarded minutes and ensured that minutes were available at all times.

The Controlling Officer submitted that among the minutes that were misplaced, were for meetings that were held in camera and that due to poor filing, the minutes were misplaced.
Committee’s Observations and Recommendations The Committee finds it unacceptable that minutes can go missing in this computer age where soft copies are always retained.

The Committee also wonders how minutes went missing just before the audit and could only be located after the audit exercise.
The Committee strongly recommends that the Controlling Officer institute disciplinary action for failure to execute duties and to take responsibility for records that could authenticate that meetings were held and justify the expenditure of K 96,640.

The Committee further recommends that a proper filing system should be put in place to ensure that the query does not recur.

The Committee will await a progress report on the matter.
14.1.4 Failure to implement Road Map to Recruit the Executive Secretary The Controlling Officer submitted that the observation by the Auditor General that the Council had been operating without an Executive Secretary since 1st July, 2020 despite having interviewed and recommended three (3) candidates from whom one should have been appointed and that as at 31st October, 2021, the position had not been filled, was correct.
The Controlling Officer submitted that following; the Council advertisement, interview, selection and recommendation of the successful candidate to the Ministry of Technology and Science for clearance, the Ministry rejected the recommendation due to the fact that the three were all found to be weak in financial management and administration.

The Council was asked to re-advertise the position.

Unfortunately, the process could not proceed as the term of the Council came to an end.
To mitigate the gap, the Ministry appointed the Manager-Programme Development and Implementation to act as Executive Secretary for administrative convenience until the Council recruited the Executive Secretary.

Furthermore, the Ministry of Technology and Science had started the process of appointing the Council and was receiving nominations.

The Council would then appoint the Executive Secretary as provided for in the Science and Technology Act No.

26 of 1997.
26 of 1997.

Committee’s Observations and Recommendations The Committee notes the response and is concerned by the lack of prudence by the Council in recommending candidates without the requisite qualifications.

The Committee will await an update on the recruitment of the substantive Executive Secretary.

95 14.2 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that the Council had a budget deficit of K12,584,776 and K2, 766,759 respectively was correct.
He further submitted that there was inadequate funding in 2019 on the budgeted annual grant, the strategic research fund, the science technology and innovation youth fund, and the centres of excellence budget lines.

Similarly, there was also inadequate funding in 2020 for the Strategic Research Fund, Science Technology and innovation Youth Fund and Centre of Excellence budget lines.
To resolve the query, Management informed the Council over the inadequate funding and urged the Council Chairperson to engage the Minister over the matter.

The Ministry was also informed of the underfunding during the annual budget presentation at the Ministry.

The Controlling Officer further submitted that the underfunding resulted in operational challenges among them failure to pay statutory obligations and implementation of planned activities.
The Committee learnt that efforts were undertaken by the Council to have its budget funded and that the Ministry of Finance and National Planning had improved its funding from 40 per cent in 2019 to 70 per in 2020 and a funding of 100 per cent in 2021.

Committee’s Observations and Recommendations The Committee resolves to close the matter but keep it in view for future audits.
14.3 Operational Matters 14.3.1 Wasteful Expenditure – Formulation of Salary Increments Exercise The Controlling Officer submitted that the observation by the Auditor General with respect to an expenditure of K 21,300 for an activity whose records could not be availed was correct and regrettable.

He further submitted that the Council would recover the funds from the concerned officers.
Committee’s Observations and Recommendations The Committee observes, with consternation, the casual manner in which the matter of wasteful expenditure was handled.

The Committee observes that the act by the officers in question, is tantamount to fraud, as the officers did not perform the purported planned activity but went ahead to process the payments for personal gain.
In this regard, the Committee recommends that disciplinary action should be instituted in accordance with section 49 of the Public Financial Management Act No.

1 of 2018.

The Committee further recommends that the money be refunded without any undue delay and proof submitted to the Office of the Auditor General.

The Committee will await a progress report on the matter.
96 14.3.2 Failure to Publish the National Science Centre JETS Strategic Plan The Controlling Officer submitted that Management acknowledged the findings of the Auditor General.

He further submitted that the responsibility of developing the Strategic Plan for Junior Engineers, Technicians and Scientists (JETS), lay with the National Science Centre.

The Council was instructed by the Ministry to give these funds to the National Science Centre to develop the Strategic Plan for JETS.
The Committee learnt that the National Science Centre which was responsible for the management and operations of JETS had developed and published the JETS Strategic Plan and the Council was given a copy of the same.

Documentary evidence was availed for verification.


Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification upon which, if there are no further irregularities on the query, the matter should be closed.
14.3.3 Delayed Completion of Research Projects – Local Research Projects The Controlling Officer submitted that the observation by the Auditor General with respect to non-completion of the research projects which were launched at a cost of K 2,008,277 and were not complete by 31st August, 2021, beyond the duration for research projects of up to a maximum of three consecutive years, subject to six (6) months extension only, was correct.
The Controlling Officer further submitted that the monitoring measures and controls were not adequate and consistently applied, hence the project implementation delays.

He further submitted that the Council had introduced quarterly reporting of projects by project supervisors.

The Council had also introduced a no-cost extension guideline which ensured that no further payment could be incurred on the project.
The Controlling Officer submitted that the main challenge with respect to the delay on research projects was due to prolonged procurement procedures of the required equipment by the universities.

The Committee also learnt that the Council had no control over the procurement of the required equipment but had since advised would be researchers to either use the equipment for the Council or its Procurement Unit.
Committee’s Observations and Recommendations The Committee observes, with concern, that in as much as the research projects are of national importance, the delays noted resulted in wasteful expenditure as other researchers who would have found solutions to the issues being researched on could not do so, rendering the research futile.
The Committee recommends that the Controlling Officer ensures that the issue is pursued with the seriousness that it deserves if Zambia is to develop its own scientific research solutions.

The Committee further urges the Secretary to the Treasury to follow the matter closely.

The Committee will await an update on the matter.


97 14.3.4 Stalled Projects The Controlling Officer submitted that the observation by the Auditor General that the Council did not terminate seven projects funded to a tune of K 772,660.59, in line with the Science and Technology Innovation Youth Fund (STIYF) Guidelines was correct.
He further submitted that it was regrettable that although the Audit and Risk Committee made recommendations that all stalled projects either be considered for termination, have the funds recovered from institutions and alternative executors or funds be released to complete any outstanding works, no action had been taken, as at 30th September, 2021.
The Controlling Officer informed the Committee that the projects identified had been reviewed and recommendation for each project made on the way forward as per the documentary evidence that was available for verification.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no further irregularities on the query, the matter should be closed.
14.3.5 Joint Research Projects - Southern Region The Controlling Officer submitted that the observation by the Auditor General regarding the delay to implement the project entered into by National Science and Technology Council and University of Zambia (UNZA) –School of Engineering to identify existing geothermal resource sites with exact coordinate locations, ground truth soil and water composition of at least seven hot springs and compile the hot springs data in geo- sciences information system (GIS) at a cost of K225,000 was correct and regrettable.
The Controlling Officer further submitted that the procurement system at UNZA delayed the process of procuring the Geological Information System Management, which was critical to the project.

However, the Geological Information System Management was eventually procured and onsite inspection was done and the progress report detailing the activities of the project was submitted to the Council showing that project was progressing well.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification upon which if there are no further irregularities on the query, the matter should be closed.
14.3.6 Irregular Variation of Funds-The Bar Coding the Aquatic Biodiversity of South – Eastern Africa Project The Controlling Officer submitted that the observation by the Auditor General that the Executive Secretary approved the variation on the project instead of the Council, in accordance with 98 Section 4.4.1 of the Bilateral Scaling up Fund Agreement, which stipulated that the recipient shall not make any variation to the scope of work and /or the budget of the project as described in the approved project proposal without obtaining prior written approval from the Council.
He further submitted that Management was of the view that the Executive Secretary could vary budget lines on an approved project and would only seek the approval of the Council, when there was a request to increase a budget line.

The Controlling Officer submitted that the funds were varied to cater for field allowances and that the equipment meant for the project was not bought.
Committee’s Observations and Recommendations The Committee finds it unacceptable that the Acting Executive Secretary ignored the provisions of Section 4.4.1 of the Bilateral Scaling up Fund Agreement and with impunity varied the project funds to cater for field allowances, as opposed to buying the equipment for the project.

The Committee recommends that that disciplinary action should be instituted against the Acting Executive Secretary for the anomaly.
The Committee will await a progress report on the matter.

14.3.7 Failure to Produce Gender Test Kit – Gender Test Project K 234, 000 The Controlling Officer submitted that the observation by the Auditor General that the Council was closing the project was correct.

He further submitted that all the data had been collected.

However, the project supervisor passed away in December, 2020.

In this regard, the Council was looking for a person who could interpret the data and publish the information.
The Controlling officer submitted that the controls governing the final stages of the project were not sufficient to ensure a proper completion of a fully funded project activity within the shortest possible time.

In this regard, the Council had started the process of closing the project with the innovator and the Institution of Affiliation using the laid down procedures in such events.

Committee’s Observations and Recommendations The Committee will await a progress report on the matter.
14.4 Procurement Matters-Delayed Completion of Construction Works for Kasempa Centre of Excellence The Controlling Officer submitted that the observation by the Auditor General regarding the delayed completion of the Kasempa Centre of Excellence was correct.

He further submitted that there was no funding for the Centre of Excellence in 2020 from the Treasury, hence the delay.
The Controlling Officer also informed the Committee that the Ministry had engaged the Treasury and funding was made available in 2021, making it possible to complete the Centre.

The Centre was launched on 18th December, 2021 and it was witnessed by the Minster of Technology and Science; Minster of Labour and Social Security, who was also the area Member of Parliament; 99 the Provincial Minister for North-western Province, and the Minister of Education, who was represented by the Permanent Secretary.
Committee’s Observations and Recommendations The Committee resolves to close the matter upon verification by the Auditor General.
14.5 Accounting Irregularities 14.5.1 Failure to Reimburse Borrowed Project Funds The Controlling Officer submitted that the observation by the Auditor General that the Council borrowed K2, 983,917.50 from the Project Research Fund Account to meet expenses such as personal emoluments and allowances, activities not related to the purpose for which the funds were meant, was correct.
He further submitted that inadequate funding by the Treasury in 2019 resulted in the Council failing to honour its long-term financial obligations such as gratuity obligations; payment of pension contribution arrears; and staff related obligations (long service award).

The Controlling Officer submitted that the outstanding amount for Science and Technology Youth Innovation Fund (STYIF) was K1,062,200.

The Council had reimbursed K1,059,885 to the STYIF.
The outstanding amount for Strategic Research Fund (SRF) was One K175,000.

The amount of K529,966 was an authorised expense from the Ministry for the validation of science policy of the ministry.

K44,667 was also an authorised expense for the Ministry which was used to pay for student‟s scholarships.

Committee’s Observations and Recommendations The Committee notes the response and directs that all documents in support of the submission should be submitted to the Auditor General for verification.
The Committee will await an update on the matter.

14.6 Staff Related Matters 14.6.1 Failure to pay Outstanding Staff Long Service Bonus The Controlling Officer submitted that the observation by the Auditor General that one officer was owed long service bonus amounting to K 45,000 for over twenty months was correct.
He further informed the Committee that inadequate funding by the Treasury in 2019, resulted in the Council failing to honour its long-term financial obligations such as gratuity; payment of pension contribution arrears; and staff related obligations (long service award).

However, the member of staff had been paid and documenatry evidence was availabe for verification.
100 Committee’s Obsrevations and Recommendations The Committee directs that all documents in support of the submisison should be submitted to the Auidtor General for verifcation, upon which, if there are no further irregualrties on the query, the matter should be closed.
14.6.2 Failure to Remit NAPSA Contributions K 3,174,909 The Controlling Officer submitted that the observation by the Auditor General that the Council owed National Pension Scheme Authority (NAPSA) amounts totalling K 3,174,909 in respect of principal (K 308,221) and penalties (K 2,866,688) accrued between January and December 2019, was correct.
The Controlling Officer informed the Committee that inadequate funding from the Treasury in the period under review affected payments for pension contributions arrears to NAPSA.

The Council had set aside K320,000 in the 2022 budget towards the payment of pension arrears.
Further, with improved funding, the Council was current with all statutory obligations, as it was able to pay them as they fell due, hence not accrueing any further debts.The Council also intended to enter into negatioations with NAPSA with a view to enter into a payment plan agreement on the payment of penalties.

Committee’s Observations and Recommendations The Committee notes the response and will await a progress report on the matter.
14.6.3 Failure to Remit Staff Pension Contributions K352,955 The Controlling Officer submitted that the obsrevation by the Auditor General that the Council did not remit staff pension contributions desipte having deducted from the employees‟ salaries was correct.

He further submitted that this was due to inadequate funding from the Treasury in the period under review, which consequently affected payments for pension contributions arrears to Saturnia.
Going forward, the Council had set aside K320,000 in the 2022 budget towards the payment of pension arrears.

Furthermore, with improved funding, the Council was current with all statutory obligations as it was able to pay as they fell due hence not accrueing any further debts.

Committee’s Obsrevations and Recommendations The Committee directs that all documents in support of the submisison should be submitted to the Auditor General for veirfciation.
The Committee will await a progress report on the matter.

101 15.0 NITROGEN CHEMICALS OF ZAMBIA: INDUSTRIAL DEVELOPMENT CORPORATION An examination of financial and other records for the Financial Years Ended 31st December, 2019 and 2020 and physical inspections of selected infrastructure revealed various irregularities to which the Acting Group Chief Executive Officer submitted as outlined below.
15.1 Governance 15.1.1 Outdated Memorandum and Articles of Association The Acting Group Chief Executive Officer, who was the Controlling Officer, submitted that the observation by the Auditor General that Nitrogen Chemicals of Zambia (NZC), operated with a Memorandum and Articles of Association which contained outdated clauses, was true and regrettable.

He further submitted that the Memorandum and Articles of Association had since been amended and updated, as at 11th February, 2022.
However, the documents had not been submitted to the Patents and Companies Registration Agency for filing and stamping.

Committee’s Observations and Recommendations The Committee notes, with disappointment, that it had to take the Auditors, for NCZ to realise that they were operating with a Memorandum and Articles of Association which had outdated clauses.
The Committee finds this indifferent approach towards managing of the entity unacceptable and recommends that disciplinary action should be instituted against the officers who failed to diligently execute their responsibilities.

The Committee will await a progress report on the matter.
15.1.2 Lack of Approved Audited Financial Statements The Controlling Officer acknowledged that the observation by the Auditor General with regard to failure to prepare audited financial statements for the period 31st December, 2017 to 2020, was correct.
The Controlling Officer submitted that NCZ did not have audited financial statements for an extended period of time, as the last audited financial statements prior to the transfer of shareholding to the Industrial Development Corporation (IDC), were for the financial year 2000.

The Committee was informed that the IDC, as the holding Company had prioritised completion of all outstanding financial statements.
As at the time of reporting, the outstanding financial statements had been audited with the 2017 audited financial statements having been concluded and signed off.

The Controlling Officer further submitted that the financial statements for the years 2018 and 2019, their respective audits were concluded and were undergoing review by the external auditors.

The audit of the financial year 2020 had been scheduled for conclusion, together with the 2021 statement by end of the second quarter of 2022.
102 Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, after which if there are no further irregularities on the same query, the matter should be closed but kept in view for during future audits.
15.2 Budget and Income 15.2.1 Failure to Generate Budgeted Income The Controlling Officer submitted that the observation by the Auditor General with respect to failure to generate budgeted for income during the period under review, was correct.
The Controlling Officer informed the Committee that failure to generate budgeted for income, was a direct consequence of lack of working capital, which resulted in the inability to secure budgeted for business from Government Farmer Input Support Programme (FISP) contracts.

The Controlling Officer submitted that Management had the capacity to supply 30,000 Metric Tonnes (MT) of D Compound fertiliser to the Government but only 15000 MT was awarded.
This was later reduced to 10,000 MT, as the Company lacked working capital.

The Committee heard that NCZ depended on financing from the Government and that the IDC did not have capacity to finance the production of the 30,000MT.

Furthermore, in 2020, the Company failed to actualise budgeted for income due to failure to fulfil orders for toll manufacturing by companies that had signed orders, citing the COVID 19 pandemic.
The Controlling Officer apprised the Committee that, as at 31stDecember, 2021, NCZ improved its performance and recorded a turnover of K381.7 million, compared to K307.4 million budget.

The Controlling Officer submitted, further, that one of the strategies the Company had employed to grow its revenues was to exploit the market opportunities within the IDC Group.

The estimated value of intra-group business was US$16.3 million per annum.
In addition, the Company was in the process of diversifying its product line from only producing the traditional granulated fertiliser to include blended fertiliser.

The product diversification project had been enabled by a capital injection of K638 million by the shareholder, out of which a new blending plant was being procured.

Production of blended fertiliser was scheduled to commence in the fourth quarter of 2022.
Committee’s Observations and Recommendations The Committee is disappointed to note that NCZ failed to actualise the supply of 30,000MT because the Government did not fund the entity.
The Committee notes, with concern, that NCZ failed to finance its own operations, which casts doubt on the capacity of the Company to remain a going concern, considering that year in, year out, the Company has received financial support, and is operating on a “life support.” The Committee notes the improvement recorded in 2021 103 and the plan to produce blended fertiliser.

The Committee resolves to await a progress report on the production of the blended fertiliser.
15.3 Information and Communication Technology Systems 15.3.1 Lack of Risk Management Framework The Controlling Officer informed the Committee that the observation by the Auditor General that NCZ did not have a Risk Management Framework during the period under review was correct.

He further informed the Committee that Management was developing a Risk Management Framework with the technical support from the IDC.

The framework was expected to be finalised by the end of the second quarter of 2022.
Committee’s Observations and Recommendations The Committee recommends that the Controlling Officer should ensure that Management implements the Risk Management Framework, in accordance with section 15 (aiii) of the Public Finance Management Act No.

1 of 2018.

The Committee will await a progress report on the matter.
15.3.2 Under utilisation of the Sun System The Controlling Officer informed the Committee that the observation of the Auditor General, that in as much as the Company had spent K294,204 for the supply of the Infor Sun Systems software, license and maintenance, it was using manual accounting systems for inventory management, invoicing, purchasing and preparation of financial reports, resulting in delays in preparing financial statements, was correct.
The Controlling Officer submitted that the delay to prepare the financial reports was due to poor record keeping and that there was a backlog of unprepared financial reports from 2005 to 2016.

The Controlling Officer further added that Management had been directed to ensure optimized utilisation of the system.
Under utilisation of the system was mainly attributed to limited hardware for implementation and inadequate capacity by staff as the Company did not have capacity to attract a high calibre of staff in the Finance Department.

Management had since embarked on a capacity building program with the system provider.

Furthermore, Management had commenced implementation of the sales and asset modules, while the inventory, purchasing and banking modules would be implemented in the second quarter of 2022.
Committee’s Observations and Recommendations The Committee observes, with concern, that NCZ has failed to operationalise the Infor Sun Systems due to limited hardware for implementation and inadequate capacity by staff as the Company did not have capacity to attract a high calibre of staff in the Finance Department.

The Committee notes the progress and resolves to await a progress report on the matter.

The Committee further recommends that Management should put up proper record systems.
104 15.4 Operational Matters 15.4.1 Under Utilisation of Plant Capacity The Controlling Officer acknowledged the Auditor General‟s observation with respect to under utilisation of the plant capacity, which was less than 20 per cent.

He further informed the Committee that out of the seven plants at NCZ, only two were for fertiliser production.
The two plants were used for the production of Compound D fertiliser (Nitrogen Phosphorous Potassium (NPK) Plant) and the Ammonium Nitrate Plant for the production of ammonium nitrate fertiliser and ammonium solution.

The other plants were auxiliary or support units.

These where the boiler; water treatment plant; instrument air section; bagging plant; and Nitric Acid Plant.

He submitted that it was regrettable that the information was not provided to the auditors.
The Controlling Officer submitted that in 2019, both fertiliser production plants were productive, while in 2020, only one plant was operating.

The NPK plant was not utilised in 2020, due to unavailability of input, arising from inadequate working capital.

In 2021, NCZ received capitalisation of K 638 million from the IDC, which resulted in increased productivity of 26,500 MT of D Compound fertiliser, out of which 15,000MT, was sold as FISP and that FISP was very important market to NCZ.
Committee’s Observations and Recommendations The Committee is perturbed to note that information was not provided to the Auditors during the audit exercise.

The Committee condemns this business-as-usual attitude and recommends that disciplinary action should be instituted against the officers responsible for the query in accordance with section 82(k) of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee further observes, with concern, the continued dependence of NCZ on FISP and urges the Controlling Officer to ensure that alternative markets are explored expeditiously.

The Committee will await an update on the matter.

15.4.2 Production Management i.


Lack of Receipt and Disposal Details - Urea Stock The Controlling Officer acknowledged as correct, the observation by the Auditor General with respect to failure to avail records of production nor purchase to the Auditors for amounts totalling Kl,628,110, as far back as June, 2021.

The Controlling Officer submitted that the query arose due to poor record keeping and mismanagement, which contributed to the removal of the Management team at the time.
The Controlling Officer apprised the Committee that the new Management was putting together information relating to the 2600 MT of urea to support the tonnage that had been debt swapped.

A reconciliation was being undertaken to account for the urea fertiliser and information would be made available by the first quarter of 2022.

He further submitted that to ensure effective record 105 keeping, Management had implemented various modules on the Sun System including a sales module.
In addition, capacity of key NCZ staff was being developed in the use and application of the account system.

Committee’s Observations and Recommendations The Committee reiterates its recommendation on poor recording keeping and recommends that disciplinary action should be instituted against the officers who have a lethargic work attitude, considering the inordinate time it has taken to ensure that the required accountable documents are availed to the Auditor General in time.
The Committee will wait an update on the matter.

ii.

Failure to Account for Fertiliser Stock The Controlling Officer submitted that the observation by the Auditor General was acknowledged.

He further submitted that it was regrettable that NCZ Management failed to keep records appropriately.

Failures in management such as this, led to the change of Management and the Board.

The Controlling Officer submitted that, from the 50,000 MT, documentation for 46,066.50 was available for review.
Documentation for the remaining 3,933.35 MT, was still being looked for and should be available for review by the end of the first quarter.

Going forward, Management had constituted a Credit Committee to appraise all applications for credit and ensure adherence to the credit policy.

The Committee was chaired by the Operations Manager, while other members included the Chief Finance Officer, Marketing Manager and Human Resource Manager.
To ensure effective record keeping, Management had implemented various modules on the Sun System and key NCZ staff were undergoing capacity building in the utilisation of the accounting system modules.

The Company had recruited debt collectors to enhance collection of receivables.

Committee’s Observations and Recommendations The Committee reiterates its recommendation on poor record keeping and urges the Controlling Officer to enhance supervision of NCZ Management.
The Committee directs that all documents in support of the submission be submitted to the Auditor General, and if there are no irregularities on the same query, the matter should be closed, but kept in view during future audits.

15.4.3 Sales Management i.


Poor Administration of E-Voucher Sales The Controlling Officer submitted that the observation by the Auditor General with respect to the poor management of fertiliser under the FISP E-voucher Programme, between the Ministry of Agriculture and NCZ, valued at K 15,445,105, was correct.
106 The Controlling Officer submitted that there was lack of communication among three stakeholders who included, the Ministry of Agriculture, which owed agro-dealers, agro- dealers who equally owed NCZ.

The Controlling Officer apprised the Committee that the amount owed by the Ministry of Agriculture to the agro-dealers, was K11,521,065.27 and not K 15,445,105, resulting in a variance of K3,924,039.73.
He further submitted that out of the K3,924,039.73, K2,417,996.51 had been collected and efforts were being made to collect the balance of K1,506.043.22 million through direct engagement with debtors and the recruitment of debt collectors.

Committee’s Observations and Recommendations The Committee is appalled by the back and forth recriminations between the Ministry of Agriculture and NCZ, which exhibits lack of seriousness and diligence.
The Committee strongly recommends that NCZ should be managed with the seriousness it deserves, as opposed to managing the Company as a makeshift shop, when the Government pumps in colossal sums of money to ensure that the Company is afloat.
The Committee urges the Secretary to the Treasury to take keen interest in the management of the Company vis-à-vis management of fertiliser, and that officers entrusted to manage the process must be competent individuals and those found wanting should be prosecuted speedily.

The Committee resolves to await an update on the matter.

ii.
ii.

Irregular Credit Sales The Controlling Officer informed the Committee that the observation of the Auditor General was correct with respect to failure to adhere to the guidelines in the Credit Policy.

He further apprised the Committee that mismanagement of credit sales agreements and management‟s failure to adhere to the credit policy contributed to the dismissal performance of the Board, Management and key staff.
The Controlling Officer submitted that as at the time of reporting, NCZ had collected K2,763,900.00, while the outstanding balance of K5,461,000.00 for two of the debtors was handed over to the NCZ Lawyers and Debt Collectors.

In addition, NCZ was still pursuing the other debtors for the remaining K1,557,220.00 and they would be handed over to debt collectors by end of February, 2022 should they not settle.
The Committee, heard that no disciplinary action was instituted against the officers who caused the irregularity, but Management withheld the separation package for the officer who was issuing credit sales without Management‟s approval.

The Controlling Officer informed the Committee that Management had constituted a Credit Committee to appraise all applications for credit, to ensure adherence to the credit policy.
Furthermore, to ensure effective record keeping, Management had implemented various modules on the Sun System and key NCZ staff were undergoing capacity building in the utilisation of the accounting system modules.

107 Committee’s Observations and Recommendations The Committee observes, with concern, and finds unacceptable, the manner in which the credit sales were managed.
While noting the decision taken to dismiss the previous Management and Board of Directors, the Committee recommends that the Auditor General should undertake a forensic audit to follow through the trail on the manner the credit sales were undertaken, and all officers either separated from the entity or still employed by NCZ, who will be found wanting should be prosecuted.

iii.
iii.

Weaknesses in Invoicing System The Controlling Officer submitted that the observation by the Auditor General with respect to failure to post 152 invoices, with amounts totalling K 246,536,537, was correct.

The Controlling Officer further submitted that the query arose due to poor management of records.

The 152 invoices had since been posted in the system, with a value of K246,536,537.00 and were available for audit verification.
Going forward, as a mitigative measure to avoid missing and misplacement of documents, Management was implementing a sales module which would be generating computerised invoices automatically and was expected to be operational by the end of the first quarter of 2022.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification and if there are no further irregularities on the query, the matter should be closed.

iv.
iv.

Missing Delivery Note Books The Controlling Officer submitted that the observation by the Auditor General with regard to failure to account for 961 missing delivery note books issued to the Marketing and Sales Department in 2015 and 2016, was correct and regrettable.

The Controlling Officer further submitted that the 961 delivery note books had since been found and were available for verification.
The Controlling Officer submitted that the earlier submission, which had indicated that the matter was reported to the Police, was withdrawn.

Management had constituted a Credit Committee to appraise all applications for credit and ensure adherence to The Credit Policy.

To ensure effective record keeping, the Sun System was being implemented and key NCZ staff were undergoing capacity building.
Committee’s Observations and Recommendations The Committee is dismayed that the Controlling Officer and NCZ Management had intent to mislead the Committee, which the Committee found unacceptable and strongly cautions the Controlling Officer against it.

The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General.

The Committee resolves to await an update on the matter after the forensic audit.
108 15.5 Procurement Matters-Contracts for Raw Materials 15.5.1 Contracts Between Nitrogen Chemicals of Zambia and Neria's Investments Limited i.

Questionable Charging of Interest The Controlling Officer acknowledged that the observation by the Auditor General that in as much as Neria's Investments charged interest on late payments, the contract did not provide for it, and that interest was charged on materials that Neria‟s Investments had not yet delivered was correct and regrettable.
The Committee learnt that the Attorney General guided Nitrogen Chemicals of Zambia to negotiate an amendment to the contract to allow for payment of reasonable interest at a rate favourable to NCZ but this was not done.

The Controlling Officer further submitted that such levels of irresponsibility contributed to the dismissal of the Board, Management and key staff.
He further submitted that Management only discovered about the charge of interest in 2020 and sought legal advice from the Office of the Attorney General, who guided that in as much as the contract did not provide for interest charge, in an event that Neria‟s Investment went to court, the courts would order payment of interest on delayed payments and hence the best option was to settle the matter out of court.
Management was renegotiating that interest charge should not be at compound interest but instead simple interest.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee observes, with reservation, the payment of interest by NCZ to Neria‟s Investment.
While the Committee takes cognisance of the advice from the Attorney General, the Committee is bewildered that NCZ sought legal advice on the payment of interest when the contract signed did not stipulate as such.

The Committee is of the view that NCZ should have renegotiated the matter in a manner that would have resulted in a win-win resolution.

The Committee resolves to await an update on the matter.

ii.
ii.

Overpayment for Raw Materials The Controlling Officer submitted that the observations by Auditor General were noted.

He further submitted that the questionable charge of interest and overpayment for raw materials contributed to the dismissal of the Board, Management and key staff.

With regard to the overpayment for raw materials, the Controlling Officer apprised the Committee as outlined hereunder.

a.

The US$ 69,310,700.00 overpayment was broken down as follows: i.
The actual over-payment in NCZ‟s books was US$22,386,601.91, which was sitting as raw materials not supplied; 109 ii.

There was also US$ 12,748,297.67 being materials that had been delivered but were not included in the US$69,310,700.69 at the time of audit.

Schedules for outstanding raw materials and un-captured raw materials by auditors were available for review; iii.

US$743,085.49 paid post audit by NCZ therefore, was not included on the reconciliation.
The Committee heard that Management had undertaken the following action: a. ensured Neria‟s Investments supplied $12.7 million worth of materials; and b. management was pursuing Neria‟s Investments for the delivery of the outstanding raw materials and was also renegotiating payment of any further interest.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.
The Committee will await an update on the matters outstanding and reiterates its recommendation on the payment on interest.

15.5.2 Questionable Charging of Interest - Savenda Management Services Limited The Controlling Officer submitted that the observation of the Auditor General was noted.

He further submitted that the questionable charge of interest was regrettable.

The contract between Savenda and NCZ did not include an interest claim clause on delayed payments.
However, the Management team at the time, agreed to pay interest to Savenda Management Services.

Questionable decisions such as these contributed to the removal of the Board and key staff.

Committee’s Observations and Recommendations The Committee reiterates its recommendation on the payment of interest and resolves to await an update on the matter after the forensic audit.
15.5.3 Sale Price Lower than Cost of Production and Market Price - Stoutone Investments Limited The Controlling Officer submitted that debt swap was not premised on the market price but rather the production cost.

Stoutone was swapping for resale and negotiated for a lower price.

The debt swap at K285 per 50kg bag was based on the production cost of K277 per 50kg bag.

NCZ therefore still made a margin of K24,000.


Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission and if there are no further irregularities on the query, the matter should be closed.

110 15.5.4 Supply of Mono Ammonium Phosphate and Muriate of Potash- Stoutone Investments Limited The Controlling Officer submitted that the observation by the Auditor General was noted.
He further submitted that failure to adhere to procurement regulations contributed to removal of Management and the Board.

Going forward, the procurement function had since been resourced with a new procurement manager and a procurement committee had been put in place to ensure procurement principles were upheld in accordance with the governing policies and regulation.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, and if there are no further irregularities on the query, the matter should be closed.
15.5.5 Supply of 15,500 Metric Tonnes of Washed Coal - Collum Coal Mining An analysis of the purchase order number 29,513 between NCZ and Collum Coal Mining for the supply of 15,500 metric tonnes of washed grade coal nuts at a fixed price of US$ 65/ton revealed the following: i.

Failure to Sign Formal Contract The Controlling Officer submitted that the observations by the Auditor General were noted.
He further informed the Committee that failure to adhere to procurement regulations contributed to removal of Management and the Board.

He further submitted that the procurement function had since been resourced with a new procurement manager and a procurement committee had been put in place to ensure procurement principles were upheld in accordance with the governing policies and regulation.
The Controlling Officer submitted that the debt swap did not take place but instead NCZ paid off the debt owed to Collum Coal Mine.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, and if there are no further irregularities on the query, the matter should be closed.

ii.
ii.

Failure to Provide Invoice and Materials Receipt Report The Controlling Officer informed the Committee that the invoice and materials receipts report for US$248,776.45 that included an amount of K1,252,728 for 1,866.79 MT of coal which were not availed to the auditors during the audit exercise were available for audit review.

111 The Controlling Officer submitted that the information could not be provided earlier due to poor record keeping.
Going forward, Management was confident that the implementation of the sales module in Sun System would ensure improvement with respect to the Company‟s record keeping.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, and if there are no further irregularities on the query, the matter should be closed.
15.6 Accounting Irregularities 15.6.1 Missing Payment Vouchers K 69,990,330 The Controlling Officer submitted that the observations by the Auditors had been noted.

At the time of the audit, documents were not availed due to poor record keeping which was regrettable.

Supporting documents for K58,730,431.09 had since been found and were available for verification.
Management had continued with the exercise of finding the remaining supporting documents within the first quarter and to review the documents to ascertain whether the funds were accounted for.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will await an update on the matter.


15.6.2 Failure to Avail Details of Advance Accounts The Controlling Officer submitted that the observation by the Auditor General with respect to outstanding staff advances amounting to K8,460,081, was correct.

He further submitted that it was regrettable that at the time of the audit, Management was unable to avail the records due to poor recording keeping.
A reconciliation on salary advances and special advances indicating how much each employee was owing was available for verification.

The prepayment accounts had been reconciled and the account listing was available for review.

Going forward, Management was confident that the implementation of the sales module in Sun System would ensure improvement with respect to the Company‟s record keeping.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission, to the Auditor General, for verification.

The Committee will await an update on the matter.

112 15.6.3 Unacquitted Advances K 10,305,590 The Controlling Officer submitted that observation by the Auditor General was noted.
He further submitted that it was regrettable that at the time of the audit, Management was unable to avail these records due to poor recording keeping.

The acquittal documents were available for review.

Going forward, Management was confident that the implementation of the sales module in Sun System would ensure improvement with respect to the Company‟s record keeping.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission, to the Auditor General, for verification.

The Committee will await an update on the matter.

15.7 Failure to Remit Statutory Contributions The Controlling Officer submitted that observation by the Auditor General was noted.

The Company had since cleared the outstanding principal on NAPSA.

The outstanding amount on NAPSA related to penalties.
Management had entered into a Time-to-Pay Agreement with NAPSA to settle the outstanding penalties.

The Controlling Officer submitted that the Company had been constrained to settle statutory obligations on time due to liquidity challenges.

As for the tax obligations, Management had agreed a debt swap with the Ministry of Agriculture (MoA), who owed NCZ K239 Million.
On the basis of the K239 million owed by MoA, the Ministry of Finance and National Planning had since approved the debt swap of a K100 Million tax obligations with ZRA and that the debt swap had materialised.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and if there are no other irregularities on the query, the matter should be closed.
16.0 ROAD TRANSPORT AND SAFETY AGENCY: MINISTRY OF TRANSPORT AND LOGISTICS An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 maintained at the Road Transport and Safety Agency (RTSA) revealed various irregularities to which the Controlling Officer submitted as set out below.
113 16.1 Budget and Income 16.1.1 Revenue Estimates-Under Collection of Revenue The Controlling Officer informed the Committee that during the period under review, the Road Transport and Safety Agency (RTSA) had an under collection of K117,143,360 against a provision of K607,342,438 in respect of road tax for the financial year ended 31st December, 2020.
He further submitted that the estimates of revenue were based on expected normal growth rates that were negatively affected by the restrictions of public movements due to the COVID-19 pandemic.

Due to COVID, there was also reduced presence of traffic law enforcement officers on the roads which led to reduced compliance by road users.

The Controlling Officer submitted that in the period under review, the Agency was only funded 43 per cent of funds that were budgeted for operations.
The failure to fund these operations had over the years negatively affected the growth in actual revenues collected as shown in the Table below.
Table: Revenue collection and funding scenarios for three years Target Revenue Collected Actual ZMW Actual Growth rate Budgeted Funding ZMW Percentag e of Funds received for Actual Funding Received operations ZMW 2018 2019 2020 458,750,0 00 509,608,0 38 607,342,4 38 462,599,978.8 0 505,824,020.7 0 490,199,077.9 0 19% 9% -3% 300,000,000.0 0 173,556,000.0 0 320,000,000.0 0 166,316,000.0 0 130,739,000.0 0 137,451,000.0 0 55% 75% 43% The Controlling Officer submitted that to mitigate the above causes, the Agency had implemented the online payment platform to enable clients pay for RTSA services online, without the need to visit RTSA services centres.
Furthermore, the process of adding the Agency‟s services to the Government Service Bus (GSB) was being done progressively and as such for selected services, clients were expected to visit RTSA service centres.

The Controlling Officer further submitted that when funding was available, the Agency would also upscale other revenue generating activities such as mobile licensing of motor vehicles and drivers.
Further, the Agency would leverage on the Safe City Project under the Ministry of Home Affairs and Internal Security to heighten speed enforcement operations considering that the Agency had the right to undertake enforcement activities as guided by the Attorney General‟s Office.

The Agency through, the Ministry of Transport and Logistics would lobby for changes in the National Road Fund Act No.
13 of 2002, so that the Agency could get direct funding from Ministry of Finance, as opposed to funding through National Road Fund Agency (NRFA).

This 114 would assist to cure the challenge of erratic funding to the Agency.

The Agency sought to be funded for all the planned activities.
Committee’s Observations and Recommendations The Committee observes that the Agency failed to reach its budgeting targets, alleging that this was occasioned by insufficient funding by NRFA through which it receives its funding.

The Committee notes with reservation, the desire by the Agency to have the National Road Fund Act No.

13 of 2022 reviewed to enable it recover funding directly from the Ministry of Finance and National Planning.
The Committee is of the view that the funding to the Agency is sufficient, however, the challenges with respect to income challenges have arisen because the Agency has veered from its mandate as ascribed in Section 4 of the Road Transport and Safety Agency Act No.

11 of 2002.

The Committee recommends that the Agency sticks to its mandate and condemns the desire to amend the National Road Fund Act No.

13 of 2002.

The Committee will keep the matter open.


16.1.2 Expenditure Estimates The Controlling Officer submitted that the observation by the Auditor General that the Agency had an underfunding of K286,336,000, against a total provision of K1,113,642,000 meant for operations, salaries and personnel related expenses was correct.

He further submitted that the Agency had two funding streams from the Government.

The Agency received a grant from the Ministry of Transport and Logistics, as well as from the NRFA.
The grant from the Ministry was received in full in the period under review.

The funds from the NRFA were earmarked for, among other things, general revenue collection operations.

Committee’s Observations and Recommendations The Committee will await a progress report on the matter.

16.2 Financial Analysis 16.2.1 Statement of Comprehensive Income-Deficit The Controlling Officer informed the Committee that the observation by the Auditor General was noted.
He further submitted that the increase in expenditure was due to the following: i. ii.

iii.

the expensing of computer consumables in 2019 that was earlier recognised as work-in progress (WIP) in the books of accounts in accordance with the International Accounting Standards; the Agency capitalised the e-ZamTIS project which resulted in increased depreciation costs; the introduction of housing allowance in 2020 pursuant to the Employment Code Act No.3 of 2019; 115 iv.
v. the procurement of additional accountable documents in 2019 and 2020 to clear the backlog of driver licenses; and the Agency suffered exchange losses of K52 million in 2020 due to the depreciation of the Kwacha against major convertible currencies, the loss was expensed.

Further, the deficit was due to reduced income arising from the underfunding from the NRFA.

If the funding was received as per budget, RTSA would have recorded surpluses for the period under review.
Further, some expenditure such as exchange loss, increased depreciation and capitalisation of the e-ZamTIS Project were one-off expenditures which were non-cash expenses.

The Controlling Officer also informed the Committee that RTSA engaged the then Ministry of Finance and the NRFA to assist in addressing the funding challenges.

Additionally, RTSA had proposed some changes to the funding system as a way of addressing the funding challenges.
The Ministry of Finance and National Planning and NRFA had been engaged to facilitate adequate and timely funding to RTSA.

RTSA had been granted Appropriation-in-Aid (AIA), as a means to guarantee funding to the Agency under the Administration budget going forward but this only covered funds received through the Ministry of Transport and Logistics.

The Controlling Officer submitted that the exchange losses could have been avoided had the full funding been done timely.
Going forward, the Agency would not commit to any contract until there was clearance from the Ministry of Finance and National Planning, with regard to availability of the funds and also clearance on the contracts by the Ministry of Justice.

Committee’s Observations and Recommendations The Committee will await a progress report on the request for the Ministry of Finance and National Planning to directly fund the Agency.
The Committee further recommends that, the Controlling Officer must ensure that the Agency adheres to the guidance to get clearance before any contracts are entered into to avert exchange losses.

The Committee will keep the matter open.

16.3 Operational Matters – Wasteful Expenditure on Issuance of Road Service License The Controlling Officer submitted that the observation of the Auditor General was noted with regret.
He further apprised the Committee that the issuance of the Road Service Licence (RSL) to Royal Africa Logistics Limited, was due to failure to follow laid down procedure by two officers.

In this regard, the officers in question were charged in accordance with the Agency‟s Disciplinary and Grievance Procedures Code.

However, the proceedings were put on hold pending the outcome of the Tribunal and Court case regarding the same matter.
The matter had since been concluded at court and the Agency had been made to pay K133,000.00 as rightly observed by the Auditors.

The Controlling Officer submitted that following the conclusion of the matter in the courts of law, the disciplinary proceedings against the officers that were put on hold had since been concluded and the erring officers surcharged with the amount cited as wasteful expenditure.
To 116 prevent the reoccurrence, Management had embarked on re-orientation of all staff on issuance of RSL and the standard operating procedures had since been shared with all members of staff.

The Committee also learnt that the officers would refund a K100,000 within thirty months and that at the time of reporting K 8,000 had been recovered.
Committee’s Observations and Recommendations The Committee is elated that disciplinary action was instituted and that the officers will refund the money paid to the transporter.

The Committee observes that K 33,000 which was paid to the lawyers remains outstanding.

In this regard, the Committee directs that the Agency should ensure that these funds are equally reimbursed as they are part of the wasteful expenditure.
The Committee will await a progress report on the refund of K 33,000.00 16.4 Procurement Matters 16.4.1 Irregular Signing and Cancelation of Contracts i.

Award of Contract to Benjing Gosail Information Technology Limited $17,221,787.56 The Controlling Officer submitted that, the observation by the Auditor General that the Agency owed Benjing Gosail Information Technology Limited (BGITL) $ 9,126,082.40, was noted.
He further submitted that in the 2017 budget, the Agency had allocated K20 million towards the payment of the advance payment to BGITL for the implementation of the ITS contract which was signed on 28th February, 2017 whose scope involved installation of speed cameras between Kafue Turnpike and Ndola and from Kabwe Roundabout to Chongwe.

The balance of the contract price was planned to be budgeted for and paid in 2018.
Further, the payment terms were structured in such a way that the only payment that should have been made in 2017 was the advance payment.

He further submitted that as correctly observed by the Auditors, the contract with BGITL was terminated due to lack of funding.
The Controlling Officer submitted that following the signing of the contract with BGITL in February, 2017, the Agency received an unsolicited proposal for the implementation of a Road Safety Management System from Intelligent Mobility Solutions (IMS) in March, 2017.

The scope of the IMS Project was wider as it was to be implemented in all the ten provinces.
The IMS Project was to be implemented using the Public Private Partnership Model of financing which meant that the private investor would provide the funding for the Project.

Additionally, the infrastructure and equipment would be handed over to RTSA after an agreed period of time.

This model was deemed to be cost effective and would increase revenue for the Government by using ICTs that would bring in a higher efficiency operation.
The ITS Project, on the other hand, was to be funded by Government directly.

117 It should be noted that the Contract with BGITL had a clause which stipulated that the contract would only become effective upon payment of the advance payment.

Since the advance payment was not made, the contract did not take effect.
In relation to the claim by BGITL, the Agency had disputed the claim and was in negotiation with BGITL in order to settle the dispute, with latest meeting having taken place on 5thJanuary, 2022.

The Controlling Officer apprised the Committee that all major contracts were submitted to Ministry of Finance and National Planning for approval before contract signing and could only proceed once the Treasury cleared the contract.
Further the Agency would ring-fence funds for contracts to avoid termination of contracts due to insufficient funds.

Committee’s Observations and Recommendations The Committee notes, with disappointment the manner in which the Agency handled the contracts between BGITL and Intelligent Mobility Solutions.
The Committee notes that the Agency acted in a manner that would lead to a wasteful expenditure and wonders how the Agency terminated a contract with BGITL and promptly signed another with Intelligent Mobility Solutions, without taking into consideration the underlying consequences.
The Committee further finds it irregular and unacceptable that while in one breath the Agency is submitting that the contract had a clause that indicated that a claim would only be done after an advance payment and that the advance payment was not done, in another breath indicates that there was a claim of US$ 9,126,082.40 and negotiations between the Agency and BGITL are underway.

The Committee recommends that this money should not be paid as the claim is ultra vires to the contract.
The Committee will await a progress report on the matter.

ii.

Award of Six (6) Contracts for construction of Motor Vehicle Examination Centres The Controlling Officer submitted that Management had noted the observation of the Auditor General.

He further submitted that the construction of motor vehicle examination centres was budgeted for in 2015 and confirmation of funds was made based on the approved budget so as to avert renting the facilities to house examination centres.
Funds were to be released by the National Road Fund Agency upon submission of request for payment by the Agency.

Although RTSA made a number of requests to the NRFA, funds were not released and RTSA could not pay the required advance payment.

On 24thJuly, 2018, Cabinet Office released a circular where it directed that all projects below 80 per cent completion would not be funded.

This led to the termination of the above identified contracts.
In line with the contract, contractors submitted claims for costs incurred up to the point of contract termination.

The Agency negotiated the submitted claims and paid the negotiated sums in order to avoid costly litigation.
He further apprised the Committee that to avoid entering into contracts without funds being available, all major contracts were submitted to Ministry of Finance and National Planning for approval before contract signing and could only proceed once the Treasury had cleared the contract.

118 The Committee also learnt that out of the six contractors, only one contractor had not been paid as there was a dispute on the claimable and payable amount, to which conservations were on going.
Committee’s Observations and Recommendation The Committee notes that in as much as the Agency is faced with challenges with respect to the six contracts, constructing examination centres is a necessity.

The Committee urges the Treasury to intervene in the matter and the Committee will await a progress report on the outstanding claim which is yet to be paid.

iii.

Purchase of Tow Truck - Southern Cross Motors The Controlling Officer submitted that the observation of the Auditor General was noted.
He further apprised the Committee that the COVID 19 Pandemic caused delays to deliver the tow trucks as factories manufacturing the base units in Europe were not operating at full capacity.

The situation was further compounded by erratic funding to the Agency as evidenced by the fact that, the advance payment was only made seven months after contract signing.
RTSA engaged the supplier to expedite the delivery of the tow truck and proceeded to extend the delivery period for the contract to accommodate the unforeseen circumstances.

The Committee learnt that the tow truck arrived in the country in September, 2021 and was at Southern Cross Motors Limited.

The Agency conducted a pre-delivery inspection of the vehicle and requested the supplier to address a few concerns before the vehicle could be delivered.
The Agency had liaised with National Road Fund Agency and the Ministry of Finance and National Planning to facilitate timely release of the Annual Work Plan funds to avoid similar occurrences in the future.

The tow truck was finally delivered and was operational.

Committee’s Observations and Recommendations The Committee notes the response and resolves to close the matter upon verification by the Auditor General and if there are no further irregularities on the matter.
16.5 Accounting Irregularities 16.5.1 Outstanding Obligation - Strategic Partners K3,048,686 The Controlling Officer submitted that the observation by the Auditor General that the Agency owed Zambia State Insurance Corporation for the period between 2018 and 2020 in unpaid commission fees was correct.

He further submitted that the arrears were as a result of funding challenges as the Agency was underfunded to a tune of K268 million for the period under review.
He further apprised the Committee that commissions to strategic partners were paid under the Agency‟s Annual Work Plan (AWP) budget which was funded through the NRFA.

119 The Committee learnt that the Agency had commenced payment of the arrears.

Over K800,000.00 had since been paid as at the time of reporting.

The Agency had continued to engage the funders (NRFA) to ensure that funding was facilitated to liquidate the debt.
Further, the Agency had continued to engage strategic partners to show its commitment to liquidate the outstanding debt.

The Controlling Officer further submitted that the Agency had engaged the Ministry of Finance and National Planning to facilitate direct funding to the Agency as opposed to funding through the National Road Fund Agency.

Going forward, the Agency would prioritise payment to the Strategic partners to avoid further accumulation of the debt.
The payments towards the outstanding commissions to strategic partners would be paid as and when the funding was available.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will keep the matter open and await a progress report on the liquidation of the outstanding commission fees.
16.5.2 Unaccounted for General Stores K 221,240 The Controlling Officer submitted that the observation of the Auditor General with respect to unaccounted for stores amounting to K 221, 240 was correct and regrettable.

He further submitted that the failure to avail the disposal documents was caused by the relocation of the Agency from the old offices at Premium House to its new office building on Dedan Kimathi Road.
The documents were made available to the Auditors though not in time and the Agency was, therefore, awaiting verification certificate.

Further, Management had enhanced its document filing system that was intended to ease the retrieval of documents.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which, if there are no further irregularities on the query, the matter should be closed.

16.6 Weaknesses in the Management of Assets-Failure to Adhere to the Act on the Disposal of Motor Vehicles The Controlling Officer submitted that the observations of the Auditor General were noted.
He further apprised the Committee that the proceeds from the sale were deposited in the administrative account in line with the Agency‟s Asset Disposal Policy and in accordance with section 44 (4) of the Public Finance Management Act No.
1. of 2018 which stated that “all proceeds from disposal of public assets and stores except those that belong to Local Authorities and Statutory Corporations shall be transmitted to the consolidated fund.” The Agency being a Statutory Corporation as established under section 3 of the Road Traffic Act No.

11 of 2002 was not required to remit disposal proceeds to the Consolidated Fund (Control 99).
120 The Finance and Administration Manual which outlined the procedure for asset disposal had since been harmonised with the Public Finance Management Act.

Further, the Agency wrote to the Secretary to the Treasury in line with the Public Finance Management informing the Secretary to the Treasury on the disposal process.
The Committee learnt that the resolution of the Agency to keep the proceeds of the disposed assets was backed by the Board and that the Agency would seek an opinion on the matter with the Office of the Attorney General.

Going forward, all disposals would be done in line with the revised Finance and Administration Manual.

Committee’s Observations and Recommendations The Committee notes the response, with concern, and finds the Controlling Officer‟s submission inadmissible.
The Committee notes that the Agency is a statutory institution and not a statutory corporation which has an element of being a limited liability company.

The Committee observes that the Agency is not exempted and therefore, should have transmitted the funds in question to the Consolidated Fund.

The Committee directs the Controlling Officer to ensure that the Agency is adhering to the provisions of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

16.7 Failure to Remit Withholding Tax to ZRA K230,533 and $16,064 The Controlling Officer submitted that the observation of the Auditor General with respect to failure to remit to Zambia Revenue Authority withholding tax in amounts totalling K230,533 and US$16,064 withheld in respect of six (6) contracts on rented properties, was correct.

He further submitted that the Agency engaged Zambia Revenue Authority for a statement of account regarding withholding tax and reconciliation thereof.
The Agency reconciled the statement of account with Zambia Revenue Authority and the outstanding amount was revised to K48,900 which had since been paid and cleared.

The Committee learnt that the debt arrears were as a result of funding challenges.

The Agency had engaged both the Ministry of Finance and National Planning and National Road Fund Agency to improve the funding situation for the Agency so as to avoid accumulation of arrears.
Going forward, all rental payments were accompanied withholding tax payments to Zambia Revenue Authority.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which, if there are no further irregularities on the query, the matter should be closed.
17.0 TIMES PRINTPAK INDUSTRIAL DEVELOPMENT CORPORATION An examination of financial and other records for the Financial Years ended 31st December, 2018, 2019 and 2020; and physical inspections of selected stations revealed various irregularities to which the Controlling Officer submitted as set out below.
121 17.1 Governance 17.1.1 Delayed Liquidation The Acting Group Chief Executive Officer (GCEO) for the Industrial Development Corporation (IDC) submitted that the observation by the Auditor General that the Board of Times Printpak Zambia Limited (TPPZL) resolved that it be placed under liquidation and be wound up by 31st March, 2021, but as at 30th September, 2021, Management had not implemented the Board resolution and the Company was still operating, was correct.
The Acting GCEO apprised the Committee that TPPZL was technically insolvent with liabilities exceeding assets by K672million as at 31st December, 2021.

The rationalisation and remodelling of the TPPZL business was being executed in a phased manner.

The first phase had involved merging of operations with the Zambia Daily Mail (ZDML) which had been in place since December, 2019.

This was designed to secure continued operations of TPPZL.
This phase had also included phased separation of staff with a view to right sizing.

As at the time of reporting, over K67 million had been spent on employee related liabilities and all salary related liabilities had been paid off and terminal benefits for sixty-five employees had been paid.

The second phase which involved liquidation would only be done when funds were available to meet employee related activities.
Furthermore, the publication of the Times of Zambia Newspaper would not be impacted by the planned interventions.

The Committee learnt that TPPZL initially had 202 employees and as at the time of reporting, the number of employees had been reduced to 138.

The Committee learnt that maintaining the 138 staff through personal emoluments amounted to K 1.4 million and the cost of separation amounted to K 40 million, and the IDC would raise the funds in question.
Committee’s Observations and Recommendations The Committee directs the GECO to submit the documents in support of the submission to the Auditor General for verification and will await a progress report on the final liquidation of TPPZL and payment of separation packages.

17.1.2 Irregular Advance - Payment of Quarterly Allowances The Acting GCEO submitted that the observation by the Auditor General regarding non- adherence to the IDC Circular No.
2 of 2018, on Board quarterly fees was correct and regrettable.

He further submitted that the payments to the Managing Director were made prior to the guidance issued by the IDC.

The payments were made between 6th March and 3rd August, 2018, whereas the circular was issued on 8th August, 2018.

Therefore, the Managing Director was paid in line with the Company practices at the time.
He further informed the Committee that no further payments were made to the former Managing Director after the date of the Circular.

Furthermore, it was regretted that the former Board Chairman was paid before the end of the respective quarter on 8thAugust, 2018 and 17thSeptember, 2018.

The practice was discontinued and the Company had not paid any quarterly fees in advance since.
122 Committee’s Observations and Recommendations The Committee notes, with disappointment, that the Board Chairman was paid quarterly allowance on the exact same day the circular was issued and another on 17th September, 2018, well after the IDC Circular No.

2 of 2018 was already in effect.

The Committee recommends that disciplinary action should be instituted against the officers who processed the payments and that a recovery of the funds in question should be effected.
The Committee will await a progress report on the matter.

17.2 Budget and Income The Acting GCEO submitted that the observation of the Auditor General with respect to a negative variance of K67,886,817 against a budget of K187,965,643 was correct and noted.

The Committee learnt that the variance arose from a decline in sales arising from intense competition from new media platforms.
However, through interventions such as reduced costs and improved efficiencies arising from the merged operations, there was significant improvement in revenue collection as the negative variance had reduced to K 9,710,040.

The Company closed 2021 with improved revenue of K48.4million, against a budget of K50.4million, representing 4 per cent deficit.

Committee’s Observations and Recommendations The Committee is elated to note the improvement in revenue generation against the set budget.
The Committee resolves to keep the matter open and in view for future audits.

17.3 Financial Analysis 17.3.1 Financial Performance - Statement of Comprehensive Income i.

Failure to Attain Break-Even Net Profit Target The Acting GCEO submitted that the observation by the Auditor General that the Board of Times Printpak Zambia Limited failed to attain a break-even net profit as a minimum for the financial years 2018, 2019 and 2020 was correct.
The Committee learnt that this was due to declining sales, high penalties and interest charged by National Pension Scheme Authority and Zambia Revenue Authority, the break-even target was not attained.

The continued poor performance led to the decision to restructure the operations of the company by merging it with those of the ZDML.

The Committee learnt that in as much as TPPZL recorded a revenue growth of K 48 million, its expenditure was K 88 million, resulting in a loss of K 40 million.
The Acting GCEO submitted that following the merging of TPPZL operations with Zambia Daily Mail, IDC was confident that this would result into profitability, as there would be a reduction in operational costs considering the printing of the two papers would be done by one entity.

123 Committee’s Observations and Recommendations The Committee notes that the strategy to merge TPPZL with Zambia Daily Mail is envisaged to reduce costs and in turn save TPPZL from liquidation but to operate on a different model.
While the Committee is elated by the proposed strategy, the Committee will keep the matter open and await a progress report on the implementation of the strategy and the declaration of profits after the merger.

ii.

Administrative Costs as a Percentage of Revenue The Acting GCEO submitted that the observation by the Auditor General that TPPZL failed to fulfil the performance contract given by the IDC to maintain administrative expenses at 82 per cent of revenue, was correct.
He further submitted that it was unfortunate that the administrative costs, as a percentage of revenue in 2019 and 2020 were 238 per cent and 191 per cent respectively.

The Committee learnt that this dismal performance led to the decision to restructure the operations of the company by merging it with those of the ZDML.

Committee’s Observations and Recommendations The Committee reiterates its recommendation to wait for a progress report on the performance of TPPZL following the new modus operandi.
17.3.2 Statement of Financial Position i.

Deteriorating Current Ratio The Acting GCEO submitted that the observation by the Auditor General that during the period under review, TPPZL‟s current ratio for three financial years under review ranged from 0.06:1 to 0.07:1, which were below the set target ratio of 0.5:1 was true and regrettable.

The Committee learnt that the current liabilities stood at K700 million against total assets of K 43.9 million by the end of 2020.
The Committee also learnt that the liabilities were largely attributed to outstanding statutory obligations owed to Zambia Revenue Authority and National Pension Scheme Authority.

The Acting GCEO further apprised the Committee that this led to the decision to restructure the operations of the company by merging it with those of the Zambia Daily Mail Limited.
Furthermore, IDC was engaging the Secretary to the Treasury with a view to request the Minister of Finance and National Planning to write off the debt owed to ZRA considering that the pay plan which was being implemented where TPPLZ was paying a K 50,000 per month would take over 1000 years to liquidate.

The Committee also learnt that with respect to the debt owed to NAPSA, TPPLZ had committed to pay the outstanding principal payments in forty-eight months but NAPSA had opted to go to court.
124 Committee’s Observations and Recommendations The Committee observes, with disquiet, that 80 per cent of the outstanding statutory obligations are legacy related.

The Committee is of the considered view that the matter of the legacy issues should be resolved administratively considering that both ZRA and TPPZL are Government entities.
The Committee recommends that the Secretary to the Treasury should promptly intervene in the matter so as to find a lasting solution, with an option of writing off the debt.

With regard to the issue with NAPSA, the Committee urges the Secretary to the Treasury to intervene with an option of resolving out of court.

The Committee will await a progress report on the matters ii.
Insufficient Working Capital The Acting GCEO submitted that the observation by the Auditor General that the Company recorded negative working capital which deteriorated by K115,027,396 from K482,356,959 in 2018 to K597,384,355 in 2020.

He further submitted that IDC acknowledged the poor performance of the Company.

This led to the decision to restructure the operations of the Company by merging it with those of the ZDML.
Committee’s Observations and Recommendations The Committee reiterates its recommendation to await a progress report on the new modus operandi.

iii.

Deteriorating Equity The Acting GCEO submitted that the equity for Times Printpak Zambia Limited deteriorated from negative K505,081,052 in 2018 to negative K656,426,395 in 2020 due to failure by the Company to record profits.
This was a result of overall poor performance which led to the decision to restructure the operations of the Company by merging it with those of the ZDML.

Committee’s Observations and Recommendations The Committee reiterates its recommendation to await a progress report on the new modus operandi.
17.4 Operational Matters – Failure to reconcile Unsold Copies of Newspapers The Acting GCEO submitted that the observation by Auditor General that Times Printpak Zambia Limited produced a total of 2,000,741 copies of newspapers with an expected revenue of K17,006,299, out of which there was a shortfall of 1,394,153 copies valued at K11,850,301, was correct.

He further submitted that it was regrettable that the reconciliation was not provided, due to poor record keeping.
The Committee learnt that a reconciliation of 1,394,153 copies valued at K11,850,301 was done and that 400 copies accounted for the copies that were given for free to both the employees and 125 government entities.

The other copies were unaccounted for as they were stolen from the printing room in Ndola and others had been sent to various regional offices from where no account was given.
The Committee was further informed that following the merger of operations, procedures had been put in place to account for all newspapers produced and that disciplinary action had been taken on the officers who were found wanting.

Committee’s Observations and Recommendations The Committee condemns the issuance of free copies and directs that this should be stopped with immediate effect, as issuance of 400 copies per day equates to a loss of revenue to the tune of K 1,460,000 per year.
The Committee directs that K 11.8 million should be accounted for with respect to the funds attributed to the staff who were disciplined and also from the regional offices where other copies were sent.

The Committee directs the Controlling Officer to submit all documents in support of the submission.

The Committee will await a progress report on the matter.
17.5 Procurement Matters Failure to Avail Procurement Files The Acting GCEO submitted that it was regrettable that the procurement records were not provided.

This was due to poor record keeping.

He further submitted that the previous Management of TPPZL was separated in December, 2019.

Following the merger of operations, procurement procedures and records were maintained.
He further submitted that the missing documents were available for verification and that disciplinary action had been meted out against the erring officer even though they were not very effective as there were no effective procedures and processes.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification upon which, if they are no further irregularities, the matter should be closed.
17.6 Accounting Irregularities-Wasteful Expenditure - Legal Fees The Acting GCEO submitted that the observation of the Auditor General regarding the payment of K 1,500,000 to a former employee following consent of the parties arising from a claim by the plaintiff (former employee) that his terminal benefits were underpaid was correct.

Management agreed with the observation that had Management paid the correct terminal benefits, the legal fees could have been avoided.
He further submitted that going forward, Management required that all employees verify and sign off computations of terminal benefits as a measure to mitigate disputes.

126 Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents to the Auditor General for verification upon which, if there are no further irregularities on the query, the matter should be closed.
17.7 Administrative Issues 17.7.1 Sale of Properties to IDC K38,685,500 The Acting GCEO informed the Committee that the observation by the Auditor General regarding the sale of seven properties by TPPZL to IDC was correct.

He further submitted that as opposed to eight properties, the IDC purchased seven commercial properties and that the eighth property was a house situated at farm No.748 in Ndola, with certificate of title No 157165, which was previously sold to a former employee.
The copy of the certificate of title was erroneously included in the schedule of titles.

He further submitted that the title deed for the property in question was handed over to the legal firm which was managing the estate of the former employee who had since passed away.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee notes the response with concern and finds the submission inadmissible as the documents submitted for verification relate to a wrong property and not the property which the Auditor General had queried.
The Committee directs the Controlling Officer to submit the documents in relation to certificate of title No 157165, Farm No 748 and the correspondence with respect to the sale of the house to the former employee, to the Auditor General for verification.

The Committee will await an update on the matter.


17.7.2 Failure to Remit Statutory Contribution K 624,387,959 The Acting GCEO submitted that the observation of the Auditor General that TPPZL owed NAPSA and ZRA in respect of pension contributions and taxes respectively, some of which had been outstanding as far back as 2018 was correct.

He further submitted that the Company started paying current NAPSA contributions from July, 2021.
The Company had also proposed a payment plan for the settlement of principal sum of K19.3 million over a period of forty-eight months.

With regards to ZRA, the company entered into a Time to Pay Agreement.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission, upon which if there are no further irregularities, the matter should be closed.
127 17.8 Staff Related Matters – Irregular Payment of Education Allowance K 4,500 The Acting GCEO submitted that that the observations by the Auditor General with respect to the payment of education allowance to the former Managing Director, to a tune of K 4,500, for his child who had already turned 21 years of age was correct.

He further submitted that Management had formally written to the former Managing Director requesting that the amount be reimbursed.
The former Managing Director had committed to make payment by 30thApril, 2022.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification.

The Committee observes, with concern that in as much as the former Managing Director made a commitment through a letter, the Committee directs that the IDC should ensure that the former Managing Director submits a bank stop order as surety.
The Committee will await an update on the matter.

18.0 TOBACCO BOARD OF ZAMBIA: MINISTRY OF AGRICULTURE A review of accounting and other records for the Financial Year Ended 31st December, 2016, 2017, 2018 and 2020 conducted at the Tobacco Board of Zambia (TBZ) Headquarters and selected stations revealed various irregularities to which the Controlling Officer responded as set out below.
18.1 Governance-Irregular appointment of Interim Board K 284,098 The Controlling Officer submitted that the observation by the Auditor General that during the period under review, TBZ did not have a substantive Board and the Minister appointed an interim Board was correct.

He further submitted that there was a delay in appointing the Board as guided by Cabinet, as there was need to put in place a new regulatory framework to guide the operations of the Tobacco Board of Zambia.
He further submitted that this was necessary to avoid regulatory capture by the Board of Directors.

The Committee also learnt that as a result of the delay, the Office of the Attorney General was consulted on the appointment of an interim Board.
In his legal opinion, the Attorney General guided that in accordance with section 4 of the Tobacco Act, Chapter 237 of the Laws of Zambia, the Minister was supposed to appoint the members of the Board and not defer it, as the law made the appointment of members of the Board mandatory.
The Committee further learnt that board allowances, amounting to K284,098 were paid to the interim Board which was appointed on 1st August, 2018, following the expiration of the tenure of office for the substantive Board, in July, 2018 and as at 30th September, 2021, the Minister had not appointed a substantive Board.

The Controlling Officer further submitted that the Ministry of Agriculture, in collaboration with the Ministry of Justice and TBZ, were working on coming up with a new law.
128 Committee’s Observations and Recommendations The Committee observes, with concern, the Ministry of Agriculture‟s delay in appointing the Board, contrary to the Tobacco Act, Chapter 237 of the Laws of Zambia, which provides that the Minister can only perform the functions of the Board for a period of three months from the date of the vacancy.
While noting that the guidance of Cabinet was well intended, the Committee condemns the guidance, as it contradicts the law which is in force until such a time that it is repealed.

In this regard, the Committee agrees with the Auditor General that the appointment of the interim Board and payment of the Board allowances was irregular.

The Committee, therefore, recommends that the funds in question should be refunded, failure to which the matter should be reported to the investigative wings.
The Committee will await an update on the matter.

18.2 Budget and Income The Controlling Officer informed the Committee that the observation by the Auditor General that TBZ recorded a positive variance of K6,843,530 against its budget of K 129,781381, was correct.

He further submitted that TBZ had over the last five years performed beyond the budgeted revenue with respect to it generated income.
This had come mainly from three main sources listed hereunder: (i) (ii) the growth in the tobacco volumes that had been witnessed in the last five years, leading to an increase in related revenue such as tobacco levies; in 2020, as tobacco sales revenue were dollar denominated hence the weakening of the kwacha improved the dollar denominated revenues such as tobacco levies and tobacco sales floor commissions; and (iii) implementation of the tobacco buying project in the period, from farmers who did not have market.
Committee’s Observations and Recommendations The Committee resolves to close the matter but keep it in view for future audits.

18.3 Financial Analysis 18.3.1 Statement of Comprehensive Income i.

Deficits (Losses) The Controlling Officer submitted that the observation by the Auditor General that TBZ recorded a loss of K4,239,168 in 2020 was correct.
He further submitted that the key factor contributing to the deficits recorded by TBZ in 2016-2018, was the departure of two of the major tobacco buying companies from the Zambian Tobacco Industry, namely; Zambia Leaf Tobacco 129 Company and Associated Tobacco Company.

Consequently, there was a reduction in the number of buyers of tobacco, leaving the growers stranded with the crop in 2016.
To respond to the plight of the farmers TBZ purchased the tobacco from the stranded farmers as a buyer of last resort.

Having encountered challenges in finding market for the tobacco bought by TBZ, the tobacco was sold at a loss in order to pay off the farmers that were still owed money from the buying project.

The Committee learnt that TBZ had put in measures which would ensure that it retained surpluses from the sale of the tobacco to ensure long term profitability.
Some of the measures were as follows: i. the Board of Directors passed a resolution in 2017 to stop getting involved in the market as a buyer of last resort and focus on the core business of regulating the tobacco industry and allow the private sector to be the key players in the buying and selling of tobacco; ii.

management recommended for the issuance of Statutory Instrument No.
67of 2018, and the Tobacco Levy Regulations Act, Chapter 238 of the Laws of Zambia to increase the tobacco levies to 2 per cent from the 1 per cent.

The levy had remained at 1 per cent for more than twenty years.

Tobacco levies were a key source, accounting for more than 60 per cent of Tobacco Board of Zambia income; iii.

management increased other incomes such as rental income in line with inflation on an annual basis to reflect realistic rental charges as prevailing in the market; iv.
management also put a freeze on the recruitment of non-essential staff to avoid having a bloated work force that could not be supported by current earnings until such a time when Tobacco Board of Zambia would record surpluses; and v. management was also cutting down on non –essential operational expenses such as travel and workshops to help in saving resources.

The Controlling Officer informed the Committee that TBZ was confident that the measures would help to generate positive returns effective 2021.
He further submitted that the financial statements for TBZ for 2021 were being audited and TBZ was optimistic that it would record a profit in 2021.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all the documents in support of the submission and the report from their auditors on the financial statements, to the Auditor General for verification, upon which, if there are no further queries, the matter should be closed.
130 18.3.2 Statement of Financial Position An analysis of the audited financial statements for 2016 to 2019 and draft statement for 2020 revealed that TBZ had High Trade Receivables Days.

i.

High Trade Receivables Days The Controlling Officer submitted that the observation by the Auditor General that during the period under review, the trade receivable ranged from 165 to 318 and was higher than thirty days, debtor‟s days‟ policy was correct and regrettable.
The Committee learnt that the biggest portion in the trade receivables figure over the last five years had been outstanding levies from Tombwe Processing Limited.

The challenge in collecting the tobacco levy debt by Management was due to the outdated legal framework.

The Controlling Officer informed the Committee that this made it difficult for TBZ Management to sue the buyer following a 2010 High Court Ruling that held that TBZ was a third party in the collection of levies.
He further submitted that Demand letters and invoices for the levies in question were sent to Tombwe Processing Limited by the Office of the Permanent Secretary in accordance with Tobacco Act, Chapter 237 of the Laws of Zambia.

The Controlling Officer informed the Committee that TBZ was optimistic that after a review of the legal framework, TBZ would be better placed to collect the levies, as the new Act would give TBZ the authority to do so.
Committee’s Observations and Recommendations The Committee resolves to await a progress report on the improvement of the debtor‟s collection days and the review of the legal framework governing the tobacco industry.

18.4 Operational Matters I8.4.1 Strategic Plan According to the Strategic Plan for TBZ for the period 2017 to 2021, TBZ had thirteen strategic objectives classified in six perspectives.

Following a review of the strategic plan, the following were observed: i.
Failure to Review the Tobacco Laws by December 2018 The Controlling Officer submitted that the observation by the Auditor General that TBZ did not review the legal framework governing the tobacco industry, in line with strategic objective No 1 as at June, 2021, was correct.

He further submitted that the delay to review the legal framework was because TBZ had used a wrong procedure to have the Act repealed and replaced.
The Committee learnt that in 2013, the tobacco industry stakeholders constituted a committee to review the tobacco industry regulatory framework without Cabinet approval, resulting in a draft Tobacco Act that was submitted to the Ministry of Agriculture in 2018.

Consequently, the 131 process was halted due to failure to follow the procedure of enacting a law, which was a preserve of the Government and not the industry stakeholders.
The Controlling Officer informed the Committee that a regulatory impact assessment had been conducted and a draft Tobacco Bill had been prepared.

The Committee also learnt that failure to review the Act resulted in the institution having on its Board, players which it regulated, a situation likely to result in conflict of interest.

Further, it was envisaged that the draft bill would be tabled before Parliament during the first quarter of 2022.
Committee’s Observations and Recommendations The Committee observes, with concern that as per the Tobacco Act Chapter 237 of the of the Laws of Zambia, the Board of Directors of TBZ has members who are industry players while at the same time are regulated by the TBZ.

The Committee agrees with view that this can result in conflict of interest.

In this regard, the Committee resolves to await a progress report following the tabling of the bill before the National Assembly of Zambia.

ii.
ii.

Failure to achieve Tobacco Inspectors to farmers Ratio The Controlling Officer submitted that the observation by the Auditor General was noted.

He further submitted that in 2016 and 2017, the tobacco to inspector ratio of 1:1000 was met and even bettered.

He further submitted that in as much as the ratio was met, the number of farmers involved in the growing of tobacco had grown over the years, leading to the ratio not being met in 2018, 2019 and 2020.
The number of farmers growing tobacco over the last five years had increased from 9,915 in 2016 to 21,312 in 2021.

This increase in the number of farmers had been accompanied by reduced hectarage being used for tobacco production due to quality control and chemical compliance issues.

Consequently, this had very minimal impact on the income of Tobacco Board of Zambia in terms of growth.
To resolve the query, a number of measures, not limited to the following, had been implemented: a. b. c. in 2021 September, TBZ recruited five additional Tobacco Inspectors; leased seven new Toyota Hilux motor vehicles at US$990 per month per unit for each Regional Tobacco Inspector in all tobacco growing areas in Zambia, to allow the inspectors to cover more areas replacing the old Nissans and motor cycles that were consistently breaking down.
This allowed the Board access to state-of-the-art transport, as opposed to buying them outright which would have cost around US48,000 per unit; developed an Integrated Database for Tobacco Registration, known as the Bright Leaf, which facilitated electronic registration of farmers in all tobacco growing areas and electronic issuance of tobacco movement permits.
This was the first electronic tobacco registration system in the Republic and it was hoped that it would be developed further in years to come to include a module to control tobacco marketing; 132 d. e. equipped and trained all Regional Tobacco Inspectors and Tobacco Inspectors with laptops each, tablets and GPS equipment making registration and inspection of farms much easier and efficient; and equipped all Regional Tobacco Inspectors and Tobacco Inspectors with internet modems, enabling them access to internet to update the electronic registration system and regular access to Head Office for guidance and help.
The Committee learnt that these measures resulted in an increase in the yield per hectare per year which, stood was at 31.5 million kilograms (kgs) at the close of 2021.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which if there are no further queries, the matter should be closed.
18.4.2 Irregular guaranteeing of fertiliser loan The Controlling Officer submitted that the observation by the Auditor General that the Board Chairman and the acting Chief Executive Officer guaranteed a fertiliser loan amounting to US$219,188 from Omnia Fertiliser Limited for the benefit of Golden Eagle Agric and Technical Services, without the approval of the Minister and full Board, was correct and regrettable.
The Controlling Officer further apprised the Committee that the action was well intended as it was meant to grow the tobacco subsector, at the time the sector was suffering from reduced sponsorship due to the withdrawal of two major tobacco sponsors, namely; Zambia Leaf Tobacco Limited and Associated Tobacco Company (ATC) Limited To resolve the issue, the Ministry sought guidance from the Attorney General, who in his opinion dated 19th May, 2020, recommended disciplinary action against the officers in question.
In line with this recommendation, a Disciplinary Committee was set up by the Board, through the Office of the Permanent Secretary Ministry of Agriculture, who recommended as follows: a. the Board should take disciplinary action against the Acting Chief Executive Officer, in accordance with the disciplinary code for TBZ; b. action should also be taken against the former Board Chairperson; c. possibly hold the former Acting CEO and Board Chairman liable in a civil matter as well as criminal; and d. the former Acting CEO of Tobacco Board of Zambia, as an implied agent and known officer of the Board, had apparent authority to bind the Institution and the internal approvals and authorities are of no concern to the third party and the contract of guarantee was already done and more so, its purpose and the extent of the agreement were within the mandate of TBZ under the Tobacco Act.
133 The Committee learnt that based on the above legal advice the Board resolved as follows: a. to pay the debt to Omnia Fertilisers who were third parties to the approval process and were not aware of what had transpired considering that the guarantee was on Tobacco Board of Zambia headed paper and to recover the debt from Golden Eagle Agriculture and Technical Services and its farmers who benefited from the loan; b. to proceed with disciplinary action against the former Acting CEO in line with the TBZ disciplinary code, leading to the non-renewal of his contract which only had two weeks left on it at the time the legal advice was received; and c. the Board further resolved to write a letter of reprimand to the Former Board Chairperson, through the Office of the Permanent Secretary, informing him of his unethical conduct and its consequences.
The Committee was further informed that Golden Eagle Technical Services, working in conjunction with the farmers in question, would grow fifteen hectares of tobacco during the 2022 production season that would be used to recover the loans from the defaulting farmers.
The original up taker of the tobacco that was grown from the fertiliser loan, Alliance One Zambia Limited, had already been engaged to be the off taker of the tobacco to be grown and the expected yield from the tobacco in question would be 22,500 kgs, which would raise the expected US$56,250, at an average price of US$2.50 per kg.

Furthermore, TBZ would not incur any loss.


Committee’s Observations and Recommendations The Committee directs the Controlling Officer to ensure that the provisions of the law must be adhered to and should avoid using logic to resolve administrative issues.

While noting that the contract for the Acting Chief Executive Officer was not renewed, the Committee expresses concern that no disciplinary action was meted out.
The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will also await an update on the clearance of the outstanding loan amount.

18.4.3 Failure to Recover Fertiliser Loans from Associations The Controlling Officer submitted that the observation of the Auditor General with respect to outstanding a fertiliser loan of K426,130 was correct.
He further submitted that the loans were disbursed to the farmer associations to support the small-scale farmers that did not have sponsorship in the 2015/2016 marketing season.

This was due to the withdrawal, from the market, of Zambia Leaf Tobacco Company Limited and Associated Tobacco Company, which were key tobacco sponsors.
The Controlling Officer further submitted that TBZ had engaged the tobacco associations in question, to facilitate the recovery of the loans from their members by the end of the 2021 tobacco marketing season.

Unfortunately, all of the associations were inactive due to financial 134 challenges and were unable to recover the loans as per signed loan agreements with Tobacco Board of Zambia in 2016.
Arising from the failure by the associations to recover the remaining balances of the loans on behalf of Tobacco Board of Zambia, TBZ engaged the tobacco buyers to facilitate recovery of the loans from the sales income of the farmers during the 2022 marketing season, following the lifting of the veil for the farmers in question.

He further submitted that failure to recover the loans through, the buyers, would lead TBZ to take legal action against the individual farmers.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the clearance of the outstanding amount on the fertiliser loans.

18.5 Irregularities in the procurement of Stand Nos.
1962 & 1963 - Kabwe K1,861,716 During the period under review, TBZ procured the Central Growers Association‟s land, warehouse and offices located on Stand Nos.1962 and 1963, in Kabwe.

The following were observed.

a.

Failure to sign contract There was no contract signed between the two parties for the purchase of stand no.

1963, as at 31st July, 2021, fifty-nine months after TBZ paid K465,500 for it.

b.

Questionable Procurement of property Stand no.


1963 procured by Tobacco Board of Zambia, was a sub-division of a bigger plot whose title deed was not in the name of Central Growers Association but in another individual, who was the original owner.

It was questionable why TBZ proceeded to pay for the property whose title deeds were not in the seller‟s name.

c. Failure to Obtain Title Deeds Section 41(4) of the Public Finance Management Act No.
1 of 2018 stated, “A Controlling Officer shall ensure that all public properties under the Controlling Officer‟s charge are secured with title deeds.” Contrary to the Act, TBZ had neither obtained the title deeds for the plots nor had the process of changing ownership to Tobacco Board of Zambia commenced, as at 31st August, 2021, more than five years after paying for the properties.
In light of the above, the Controlling Officer submitted that the properties in question were used as security by Central Growers to obtain a loan from Indo Zambia Bank.

Central Growers Association defaulted on their loan and Indo Zambia Bank was about to foreclose on the said properties.

The Board of Directors spotted an opportunity to buy the properties worth K3.5 135 million as per valuation and survey report of two years prior to the purchase that was used by the Bank.
The Controlling Officer further submitted that TBZ wanted to use the properties as a sales floor, as Central Province farmers were being forced to sale their tobacco in Lusaka due to lack of a sales floor in their area, at a huge cost to the farmers in terms of transport, accommodation and food.
The Committee learnt that Stand Number 1963 was bought because the main warehouse that was bought on Stand Number 1962, by Tobacco Board of Zambia also had a third of its portion on Stand Number 1963, which belonged to the former Board Chairperson of Central Growers Association, under whose name the title was.

This was not brought to the attention of the Board at the time of purchase.

Only after the payment had been made to the Bank were the title deeds released to the Board.
The Controlling Officer apprised the Committee that to resolve the query, the contract of sale for Stand 1963 had been prepared by the lawyers of Tobacco Board of Zambia and was awaiting execution.

The execution had been delayed by the fact that the former Chairperson of the Central Growers Association, who pledged his personal property as collateral passed away and the lawyers were working with the Administrator of his estate to facility the execution of the contract of sale.
Furthermore, the process to acquire title deeds for property number 1963 would immediately follow the execution of the sales contract with the Administrator of the Estates for the Late Board Chairperson of the Estate.

While for Stand No.

1962, the process of obtaining the title deeds had been completed.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations While the Committee is elated that TBZ acquired the title deed for Stand No.

1962.
1962.

The Committee is, however, disappointed to note that TBZ resolved to procure the properties in question, before undertaking due diligence.

The Committee directs the Controlling Officer to institute disciplinary action on all the officers who failed to execute their duties.

Furthermore, the Controlling Officer is directed to ensure that the title deed for property number 1963 is acquired without undue delay.

The Committee will await an update on the matter.


18.5.1 Failure to collect rentals from Central Growers Association K 161,700 The Controlling Officer submitted that the observation by the Auditor General with respect to failure to collect rentals amounting to K 161, 700 was correct.

He further submitted that it was a challenging task to handle the affairs of Small-Scale Farmer Associations, because they were a brain child of TBZ.
They were created, to help small scale farmers have a voice in the tobacco industry in order to protect their interests against the buying companies which seemed to be better organised than the local farmers, as opposed to them going it individually.

The Committee also learnt that, as at 31st August, 2021, the Central Growers Association had not signed the lease agreement sent by TBZ.
136 The Controlling Officer submitted that an eviction letter had been issued to Central Growers Association giving them three months to clear their debt.

The matter had been handed over to the Tobacco Board of Zambia lawyers, to facilitate recovery of the rental arrears and eviction of the tenant.

Committee’s Observations and Recommendations The Committee is disappointed to note that TBZ failed to ensure that a lease agreement was signed.
In this regard, the Committee recommends that the Controlling Officer should institute disciplinary action against all officers who failed to ensure that the lease was signed appropriately.

The Committee will await an update on the payment of the outstanding rent, disciplinary action and signing of the lease.
18.6 Accounting irregularities 18.6.1 Failure to Collect Tobacco Levy K 30,000,000 The Controlling Officer submitted that the observation by the Auditor General that tobacco levy amounting to K 30 million had not been remitted by Tombwe Processing Limited since 2018, was correct and regrettable.
The Committee learnt that TBZ could not take legal action against Tombwe Processing Limited because of the High Court Judgment of 18th October, 2011, in which it was decided that the Minister, not TBZ was mandated to collect tobacco levy.

It was further decided that the collection of tobacco levy under the Tobacco Levy Act, was a statutory function and as such, could only be delegated by the Minister.
The Committee also learnt that as at 31st August, 2021, the Minister had not delegated the function to TBZ, in as much as the Ministry of Agriculture had sent seven demand letters to Tombwe Processing Limited regarding the unremitted levy, which remained uncollected as at as the time of reporting.

The Committee further learnt that TBZ was unable to collect the levies due to an outdated regulatory framework.
Furthermore, the Permanent Secretary Ministry of Agriculture, wrote a letter to the Secretary to the Treasury requesting for the accounts of Tombwe to be garnisheed by the Government until the entire debt owed was recovered in full, to which there was no response.

Committee’s Observations and Recommendations The Committee notes, with consternation, the impunity with which Tombwe Processing Limited has refused to remit the levies collected on behalf of the Board, to a tune of K 30 million.
The Committee is of the view that the Ministry of Agriculture has taken a laissez-fair approach in ensuring that Tombwe pays the outstanding levies, which led TBZ to take Tombwe to court, even though it had no mandate under the Act.

The Committee urges the Secretary to the Treasury to intervene in the matter and directs that the Controlling Officer should, as a matter of urgency, take the matter to court.

The Committee will await an update on the matter.


137 18.6.2 Uncollected Rental Income from Vacated Tenants The Controlling Officer submitted that the observation by the Auditor General with respect to non-collection of rentals totalling K777,672 as far back as July, 2011, was correct and regrettable.

He further submitted that the accounts in question were handed over to a Court Certified Bailiff and lawyers to facilitate the collection of the outstanding rentals.
In this regard, Judgments had been obtained in some and court certified bailiffs had obtained execution orders to sell the assets in others.

However, the amounts recovered had not been adequate to cover the rentals and, in some cases, TBZ had been stopped from executing the orders.

The Committee learnt that other tenants could not be traced because of the time factor.
The Controlling Officer apprised the Committee that impairment provisions had been made in the Financial Statements for all the outstanding debts in question and once the substantive Board was in place, an application would be made to have all the cases where judgments had been obtained to be delivered and those whose assets were collected but not adequate to be written off.
The Committee also learnt that most of the debt was legacy related and that efforts to collect the outstanding rentals has proved futile as most of those who owed were entrepreneurs who had failed to breakeven in their business.

Committee’s Observations and Recommendations The Committee notes, with concern, the challenges faced by TBZ in collecting outstanding rentals.

The Committee is saddened to note that TBZ is contemplating to write off the debt on outstanding rentals.
The Committee directs the Controlling Officer to ensure that mechanisms are put in place to ensure that outstanding rentals are collected and that the query does not recur.

The Committee resolves to await an update on the matter.

18.7 Administrative Issues 18.7.1 Infrastructure Perspective i.

Failure to Acquire Title Deeds K43,920,850 The Controlling Officer submitted that the observation by the Auditor General that TBZ had seventy-five properties which had no title deeds, was correct and regrettable.
He further submitted that plans to acquire title deeds were linked to the plan to identify and retain only viable TBZ infrastructure, going forward.

The Committee learnt that in 2018, TBZ engaged a Property Consultant to help identify all properties and make recommendations on the future viability of the properties in question.
The contract with the Property Consultant was divided in two phases, phase one was about property identification and recommending which ones were viable and could be kept by TBZ and which ones needed to be disposed of, either through selling or handing back to Government for onward handing over to the local communities occupying the properties.

This phase was done and completed and the report submitted to Management by the Property Consultant.
138 The Controlling Officer further apprised the Committee that in the second phase TBZ was scheduled to acquire title deeds on the properties that TBZ had decided to retain as viable from phase one.

However, this process had been delayed as there was no substantive full Board to make the decision as to which properties from phase one were to be kept and which ones to be handed back to the Government.

Once the full Board was in place, the report would be tabled before it.
Committee’s Observations and Recommendations The Committee finds the submission inadmissible, as the decision to wait for the Board, which has not been constituted does not adhere to the provisions of section 41(4) of the Public Finance Management Act No.

1 of 2018.
1 of 2018.

The Committee directs the Controlling Officer to ensure that in consultation with Management, a solution with regard to which properties will be disposed of and which ones kept, is promptly made so that the title deeds are acquired without further delay.

The Committee will await an update on the matter.

ii.
ii.

Failure to Develop an Infrastructure Maintenance Policy The Controlling Officer submitted that the observation that TBZ had not formulated its Infrastructure Maintenance Policy by June, 2021 was correct and regrettable.

He further submitted that the action plan of developing the Infrastructure Maintenance Policy was linked to the recruitment of the Real Estate Manager, who was supposed to lead the process.
The implementation had been delayed due to the financial challenges TBZ faced in 2018 and 2019 due to non-remittance of levies by Tombwe Processing Limited, leading to the freezing of the recruitment of staff.

Notwithstanding the delayed recruitment of the Real Estate Officer, the draft Maintenance Policy had been developed and was awaiting tabling before the full Board once it was reconstituted.

Committee’s Observations and Recommendations The Committee will await an update on the matter.
18.7.2 Sale of Houses to sitting Tenants who are Non-employees of TBZ The Controlling Officer submitted that the observation by the Auditor that TBZ had not executed the contracts of sale with six former sitting tenants contrary to the consent judgment and that the tenant of Flat 5 Kaleya Flats in Roma Township was still owing Tobacco Board of Zambia amounts totalling K26,780.63, was correct.
The Committee learnt that TBZ had taken the issue relating to Mr Musonda Sampa the occupant of Flat No.5 Kaleya Flats in Roma Township back to court.

The case hearing was expected to take effect in February, 2022 by which time TBZ expected to obtain possession of the flat.
It was also expected that by this time, TBZ lawyers would have made an application for an order to set out the time period within which the contracts of sale should be executed and to assess the rent payable from the time the tenants stopped paying rentals to the time the contracts of sale would be signed.
139 Committee’s Observations and Recommendations The Committee observes with concern that TBZ had not signed the contracts of sale as at 31st August, 2021 even though the consent judgement was issued on 3rd December, 2019.

The Committee condemns this laxity and directs the Controlling Officer to institute disciplinary action against all the officers who failed to execute their duties.

The Committee will await an update on the outstanding matters.
18.8 Staff Related Matters 18.8.1 Failure to Remit Statutory Contributions K 5,223,552 The Controlling Officer submitted that the observation by the Auditor General was noted.

He further submitted that much of the outstanding statutory obligations were for 2018 and 2019.

However, TBZ was current with respect to the payments to both Zambia Revenue Authority (ZRA) and National Pension Authority (NAPSA).
With respect to the outstanding obligations for NAPSA and ZRA, TBZ owed NAPSAK800,000 and K 1.7 million to a private pension scheme.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to ensure that Management formulates a payment plan which should indicate how much and how long it will take to clear the outstanding statutory obligations.

The Committee will await an update on the matter.


18.8.2 Failure to Implement Government Policy on Procuring and Sale of Personal to holder vehicles The Controlling Officer submitted that the observation by the Auditor General regarding the failure to adhere to Circular No.

17 of 2016 issued by Cabinet, was correct.


The Controlling Officer further submitted that it was regrettable that the Board of Tobacco Board of Zambia did not review their Conditions of Service and Contracts of their Senior Staff in line with Cabinet Circular Number 17 of 2016.

The Controlling Officer informed the Committee that of the three vehicles bought during the period in question, only two vehicles, valued at ZMW938,602 were sold.
The third one which was bought in December, 2020, valued at ZMW1,223,800 was still being used by the Board as an operations vehicle.

Furthermore, of the two vehicles that were bought in 2017 by the Board were sold to the officers of the Board.

None of the vehicles was sold at a loss as the Board recorded profit from both sales.
In order to avoid a recurrence of similar problems in future, the contracts for the senior officers of Tobacco Board of Zambia and their Conditions of Service had since been amended in line with Circular No.

17.

140 Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, after which if there are no further irregularities on the query, the matter should be closed.
19.0 ZAMBIA AIRPORTS CORPORATION LIMITED (ZACL) MINISTRY OF TRANSPORT AND LOGISTICS An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 and physical inspections of selected stations revealed various irregularities to which the Controlling Officer responded as set out below.
19.1 Budget and Income The Controlling Officer informed the Committee that the observation by the Auditor General that in 2020, Zambia Airports Corporation Limited (ZACL), had a negative variance of K 4,126,168, against a budget of K273,862,647 was correct.

He further submitted that the negative variance recorded in 2020, was due to the suspension of scheduled flights by almost all airlines other than Ethiopian Airlines.
This arose from global lockdowns and travel restrictions in a bid to contain the spread of the COVID-19 pandemic.

The Board of Directors approved the Corporation‟s revised 2020 Budget.

However, due to the dynamics of the pandemic, it was impossible to accurately predict its effects on many industries, including the aviation industry, hence the adverse variance of 1.6 per cent.
The Controlling Officer also informed the Committee that Management had embarked on resource mobilisation ventures by engaging developmental agencies such as African Development Bank (AfDB) and the French Development Agency (AFD) to invest in non- aeronautical revenue generating capacity.
The Controlling Officer apprised the Committee that 90 per cent of the Corporation‟s revenue was aviation related, which had been negatively affected by communicable disease out breaks such as COVID, and consequently the failure to achieve budgeted revenue for 2020.

Further, the Corporation embarked on a route development strategy, where targeted airlines, such as Qatar Airways, which started operations in August, 2021, were directly approached.
The Corporation also expanded its ground handling business by acquiring ground handling contracts from Qatar Airways and Bank of Zambia.

Management was optimistic that these measures would cushion the variability of the institution‟s revenues due to negative events in the aviation industry.

The Committee also learnt that Management had embarked on non-aeronautical revenue, through construction of hotels, car parks, fuel stations and housing facilities dubbed Airport City.
141 Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission for verification.

The Committee resolves to await an update on the progress recorded on the strategies to improve the non-aeronautical revenue.
19.2 Financial Analysis 19.2.1 Financial Performance-Statement of Comprehensive Income An analysis of Statements of Profit or Loss and Other Comprehensive Income for ZACL for the financial years ended 31stDecember, 2018, 2019 and 2020 revealed various irregularities as outlined below.

i.

Revenue Decline The Controlling Officer submitted that the observation by the Auditor General that revenue declined from K 496,926,326 to K 269,736,479, was correct and regrettable.
He further submitted that the decline in revenues was as a result of a reduction in major revenue streams such as over flight, landing and navigation fees, in the year 2020, because of the suspension of scheduled flights by almost all airlines, other than Ethiopian Airlines, arising from global lockdowns and travel restrictions in a bid to contain the spread of the COVID-19 pandemic.

The Controlling Officer reiterated that Management had embarked on increasing revenue using non- aeronautical revenue.
Committee’s Observations and Recommendations The Committee resolves to await a progress report on the increase of revenue.

ii.

Net Profit Margin Ratio The Controlling Officer submitted that the observation by the Auditor General that the profit margin ratio reduced from 16 per cent in 2018, to negative 90 per cent in 2020, was correct.
He further submitted that with the fall in revenues in 2020 already highlighted, the net profit margin in that year declined because the operating cost structure for the Corporation remained constant in the face of reduced activities in the aviation sector due to the COVID – 19 Pandemic.

The Controlling Officer apprised the Committee that pre-COVID-19 pandemic, the Corporation consistently recorded profits and declared and paid dividends to the Government.
The year 2020, was an exceptional one and the aviation industry was in survival mode due to loss of traffic and revenues.

The Controlling Officer reiterated that to mitigate the loss arising from the decline in aeronautical revenue, Management‟s strategic focus was anchored on growing non-aeronautical revenue streams.

142 Committee’s Observations and Recommendations The Committee resolves to await a progress report on the improvement of the Net Profit Margin Ratio.

iii.
iii.

Operating Expenses as a Percentage of Revenue The Controlling Officer submitted that the observation by the Auditor General that Management failed to reach its set benchmark of not having operating costs more than revenue of not more than 73 per cent, as it recorded a 92 per cent, operating costs which rose to 205 per cent, was correct and regrettable.
The Controlling Officer further informed the Committee that 2020 ratio of actual performance was affected by reduced revenues, as the operating cost structure for the Corporation remained constant in the face of reduced activities in the aviation sector due to the COVID – 19 Pandemic.

Additionally, operating expenditure was higher than budgeted due to an increase in depreciation to K81.06 million, against a budget of K17.06 million, following a revaluation of assets.
Furthermore, provisions for bad debts, as provided under the International Financial Reporting Standards (IFRS), amounted to K53.81 million, against a budget of only K7.25 million.

Other operating expenses incurred, were due to necessary and non-discretionary expenditure related to COVID-19 personal protective equipment and other hygiene materials to meet the Ministry of Health and World Health Organisation guidelines in containing the spread of COVID -19 pandemic on passenger arrivals.
As for 2019 and 2018, the period was characterised by significant investments in terms of capital and operational expenditure with the view to improving the Corporation‟s revenue generation capacity, hence not meeting the targeted ratio.
These included the massive airport infrastructure development projects of which Kenneth Kunda International Airport, was a beneficiary of a new terminal and other infrastructure, at a cost of US$360 million and New Simon Mwansa Kapwepwe International Airport green field Airport, at a value of US$397 million.

This increased expense project related costs such as monitoring costs.
In addition, in 2018, Government transferred ten provincial and strategic airports to Zambia Airports Corporation for better management and upgrading.

During the period, developments were being undertaken in Solwezi, Mansa, Kasama and Mbala.

Committee’s Observations and Recommendations The Committee notes, with concern that the provision for depreciation skyrocketed from K17.06 million to K 81.06 million, as a result of the re-evaluation of the Corporation‟s land and buildings.
The Committee directs the Controlling Officer to ensure that, going forward, Management should be consistent in undertaking evaluation of costs for the Corporation to be able to contain costs which erode its profits if not well managed.

The Committee resolves to keep the matter open and in view during future audits.
143 19.2.2 Statement of Financial Position An analysis of the Statements of Financial Position for ZACL for the financial years ended 31st December, 2018, 2019 and 2020 revealed the following: i.

Trade Receivable Days The Controlling Officer submitted that the observation by the Auditor General that ZACL had Trade Receivable days of 96 to 302 days, which were higher than the company‟s policy of thirty days, was correct.
The Committee learnt that the International Air Transport Association (IATA) cycle for receivables was sixty days from date of invoice and since the Corporation‟s major debtors were invoiced through IATA, the actual cycle was sixty days.

In this regard, Management revised the Credit Policy from thirty days to sixty days and submitted it to the Board, which approved the adjustment of the credit period to align it with the industry period of sixty days, even before the audit was conducted.
The Controlling Officer apprised the Committee that the cited amounts of outstanding receivables, totalling K103,290,383, was legacy (old) receivable and did not relate to the operations of the Corporation in the period under review.

Therefore, it distorted the receivable days.

In order to address this, Management had secured these receivables by turning them into loans which would accumulate interest.
Management had been negotiating with the concerned debtors, Proflight and Mahogany Airlines, for signed payment agreements for purposes of recovering the old debt.

In order to cartel further accumulation of debt, ZACL Management requested Proflight to join the IATA Clearing House.

Proflight joined the IATA Clearing House in March, 2013.

Thereafter, there had been no accumulation of debt on the part of Proflight.
Furthermore, Management had reviewed the debt collection process and changed responsibilities from the Credit Controller to the Account Managers to monitor and engage the debtors consistently.

Management had also introduced cash basis on most aeronautical services.

The Committee also learnt that Management and the debtors were yet to resolve the aspect of collateral and the period in which to clear the outstanding receivables.
Committee’s Observations and Recommendations The Committee observes that Management has formulated a strategy to collect the outstanding receivables, which seems simple to implement when in actual sense it will require more than signing payment plans.
The Committee observes that the trade receivables have been outstanding for a long period and is of the view that in as much as Management has resolved to convert the trade receivables into a loan, which will accumulate interest, the Committee notes that the Corporation may need an intermediary to manage the collateral and interest accrual, as the entity is not a financial institution.

The Committee will await an update on the collection of outstanding receivables, totallingK103,290,383.

144 ii.
144 ii.

Failure to charge Interest on outstanding Debtors The Controlling Officer submitted that the observation by the Auditor General that ZACL failed to collect rentals in amounts totalling K 169,924,190.25, as at 31st December, 2020, which had been outstanding from as far back as 2012, was true and regrettable.

The Committee learnt that as at 31st March, 2021, Management had not calculated interest due on outstanding amounts.
The Controlling Officer informed the Committee that ZACL entered into tenancy agreements with several companies for renting of office space and utilisation of runways.

He further submitted that some of the interest cited was due to delayed payments by the tenants dating as far back as 2012.

These had become irrecoverable and therefore, Management was in the process of recommending to the Board to write off the accrued debt and interest because some debtors had ceased operating.
Furthermore, Management was seeking to put in place an Enterprise Resource Planning (ERP) system that would automatically compute interest on unpaid rentals.

Committee’s observations and Recommendations The Committee observes, with concern, Management‟s failure to collect rentals from the several companies which rented office space and utilised its runways.

The Committee is of the view that failure to collect rentals, was as a result of failure to have structured systems to avert accumulation of rent.
The Committee recommends that disciplinary action should be instituted against all the officers who failed to execute the responsibilities timely.

The Committee further recommends that rentals must be collected from all those companies which have not ceased to operate and a report must be submitted on how much will be written off.

The Committee will await a progress report on the collection of outstanding rentals and the implementation of the Enterprise Resource Planning.

iii.
iii.

Return on Capital Employed The Controlling Officer informed the Committee that the observation by the Auditor General that during the period under review, the Corporation‟s Return on Capital Employed (ROCE), was above the Bank of Zambia benchmarks, except in 2020, when the ratio deteriorated to negative 3 per cent was correct.

The Committee learnt that pre-COVID -19 results revealed that the Corporation‟s ROCE performed above the BOZ interest rates.
However, 2020, was a challenging year in particular for the aviation sector which was marred with lockdowns, closure of borders and travel restrictions across the globe.

This notwithstanding, Management was putting up measures to scale down the effects of the COVID-19 pandemic on the Corporation‟s revenues and finances by putting in place a new Corporate Strategic Plan, which included growing the non-aeronautical revenues.
Furthermore, the Corporation re-valued its assets in 2020, thereby increasing the asset value and depressing the ROCE.

The revaluation was necessary to reflect the true realisable value of the company‟s assets in line with the International Accounting Standards.

145 Committee’s Observations and Recommendations The Committee will await a progress report on the implementation of strategies earmarked to improve ROCE.
19.3 Operational Matters 19.3.1 Weaknesses in Key Performance Indicators The Controlling Officer submitted that the observation by the Auditor General that ZACL had set a number of Key Performance Indicators (KPIs) for the period under review, out of which a number of them were not achieved as envisaged, was correct The Committee learnt that the KPIs were as set out in the Table below.
Table 19.3: Key Performance Indicators The Committee further learnt that based on the set benchmarks for the period under review, Management did not achieve a number of its set benchmarks as outlined in the tables below.
146 S/NPerformance IndicatorTargetActual Deviation20201Collection of Forex Debtors 30% of US$17.6million of debt US$4.02million collected representing 23% 7%2Debt CollectionCollectUS$ 6.22million debtUS$524,907 was collected91.5%3Finalise lettable space KKIA shopping mallAtleast 30% space should be let out0% tenancy agreements achieved100%4Ensure timely collection of debt60% debt aged below 120 days29% was aged below 120 days31%5Finalise Lettable space at KKIA new terminalAchieve 80% letable space37% achieved43%6Achieve revised budget PBTMaintain projected loss to below 193.2millinActual loss icurred was 221.8m(Draft accounts)15%7Approved Sucession Plan for key positions100% by December 2020Not achieved at year end100%2019Performance IndicatorTargetActual Deviation1 Revenue(Non Aeronautical)634million613.3million3.26%2Revenue(Aeronatical)584.5million558.1million5%3Mandatory training100% by year end59%41%4Recurrent training70% of 77 courses53%17%2018Performance IndicatorTargetActual Deviation1Construction of perimeter fences at HMNIA100%58%42% 1 KPI 2020 Collection of forex debtors Explanation/Actual Performance The position of the forex debtor as at 31st December 2020 was as shown below.
Details IATA Proflight Commuter Mahogany ZEGA Others Total Amount (USD) 2,391,900 2,836,847 873,280 596,280 2,829,779 9,528,085 The forex debtors balance was USD9.5 million and not USD17.6 million as reported.

The actual collection stood at 42% which resulted in a performance which was above target by 12%.

Worth noting was that IATA debtors carried a low risk in terms of debtor payment.
2 3 Debt collection Major component in the dollar debt was attributable to the two airlines which Management was in the process of converting into loans as guided by the Board.

1.

The shopping mall was only handed over to ZACL in October 2021, therefore, making it difficult to aggressively market it before a clear handover date.

space Finalise lettable KKIA Shopping mall 2.


Feedback from major super markets that would anchor the shopping centre was that the Anchor Shop did not meet their requirements in terms of size as it was smaller than most of their retail shops.

3.

The location of the property was not attractive due to its isolated nature as it was built far from communities and other urban developments.

4.
4.

The Advent of COVID -19 pandemic led to melt down in property market, with most business operators not willing to invest in new projects due to subdued business environment and uncertainty on the future outlook.

5.

The Corporation had received a conditional offtake from Spar Zambia to anchor the facility provided ZACL covered the fit-out cost of fixtures.

Most of the operators were facing challenges in meeting their obligations due to the adverse effects of the COVID- 19 on their operations.
Because of this, the Corporation entered into payment plans with most clients.

In addition, account managers have been allocated to each client as a way of improving regular contact with clients.

1.

The COVID-19 pandemic was at its peak during quarters 1 and 2 of the year, making it difficult for decision makers to be reached due to restrictions in travel.
This resulted into would-be tenants failing to 4 5 Ensure collection debt timely of Finalise Lettable space at KKIA New 147 Terminal make investment decisions and the leasing agents could not receive any feedback on the intention to lease.

2.

Passenger numbers were subdued making it difficult for operators to invest.

3.

Airlines which were the key players were resisting moving to the new terminal building due to upward adjustment on the rentals.
This was compounded by airlines such as Air Namibia and Tag Angola who ceased operations as a consequence of the pandemic.

4.

Handover dates by the contractor were nor clear, making it difficult to communicate to the Leasing Agent to execute the contracts with tenants, as there are financial implications of executing the leases and delaying handover to tenants.

5.
5.

The financial position of the Corporation was weak making it difficult to mobilise the resources that were required for the airlines and some other commercial spaces as these did not form part of the core infrastructure handed over on completion.

The notable factor was mainly coming from depreciation which was above the budget by 39%, before the revaluation of land and building, depreciation on a monthly basis was sitting at K3.7 million against the budget of K2.1 million.
At year end, depreciation was at K50million, against the budget of K36 million, thus contributing to the loss recorded in the year.

Succession Plans were developed based on key positions submitted by all functional heads.

However, what was outstanding was an agreed position on what constituted key positions, which was resolved in the subsequent year submissions.
6 7 Achieve revised budget PBT Approved Succession Plan for Key positions While the Performance in 2019 was as follows: - 1 KPI 2019 Revenue (Non- Aeronautical) 2 Revenue (Aeronautical) Explanation/Actual Performance Total operating income for 2019 stood at K591.5 million.

The Corporation recorded non-operating income of K22 million, bringing the total income to K613.5 million (Source: Audited financial statements 2019).
It was worth noting that out of the K613.3 million reported by the Auditors, K34.5 million accounted for non-aeronautical revenue and not K613.3 million, as per report.

The current ratio of non- aeronautical revenue to total income, stood at 10%.

In the year under review, the ratio stood at 6% due to some warehouses being vacant for some time.

The initiatives Management had embarked on was targeting to grow this portfolio to 15% by 2023.
As stated above, the total operating revenue for the Corporation was K591.5 million, against the budget of K584.5 million, out of the 148 3 Mandatory Training 4 Recurrent Training K591.5 million total revenue, K557 million pertained to aeronautical revenue.

The operating income for 2019 was above budget by K7 million.

All mandatory trainings were carried out in the year under review.

However, in the training schedule, all trainings were bundled together with non-mandatory trainings.
There were 61 trainings budgeted for in the year and 51 were conducted.

In the year under review, the Corporation had two big projects, the KPMG Job Evaluation Exercise, and the ERP implementation.

This meant that the available resources were to be shared to all cost lines to ensure that the projects were completed on time.

KPI 2018 Explanation/Actual Performance 1 Construction of perimeter fences HMNIA at Perimeter fencing was 100% done at the station.
However, during the security audits, there were concerns raised to ensure that pinning was carried out around the perimeter fence to deter animals or people accessing the area underneath.

Works to pin down the fence had commenced.

However, this could not be completed due to cash flow challenges.

Works were ongoing and were expected to be completed in 2022.
The Committee learnt the in as much as the new airport had been handed over, many of the lettable spaces had not been occupied, as there were complaints that the rental rates were too high The Controlling Officer further submitted that Management was considering to reduce the rates and increase them gradually.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.
The Committee further recommends that Management should review the rental rates expeditiously, as there is an opportunity cost in keeping the lettable space as a white elephant and insisting on charging higher rent rates.

The Committee will await a progress report on the full utilisation of the facilities at the new airport vis-à-vis revenue generation and achievement of the un-realised key performance indicators.
19.3.2 Failure to Complete Works Earth Works and Construction of Gabion Mattress Wall During the period under review, ZACL engaged Brick World for the construction of a gabion mattress wall and replacement of a vandalised fence at Solwezi Airport, at a contract price of K3,439,854.08, with a duration of twelve weeks.

An analysis of the project revealed the following: 149 i.
Failure to Complete Works K1,078,953 The Controlling Officer submitted that the observation by the Auditor General that as at 31st January, 2021, the contractor had been paid amounts totalling K2,313,483.19, representing 67 per cent of the contract sum of K3,439,854.08 for the scope of works which included earthworks, erection of 8km of razor wire fence and construction of a gabion mattress wall, was correct.
The Committee learnt that works done included grading of access roads to the depression and that, works costing K1,078,953, were still outstanding, ten months after the expected completion date and the contractor was not on site.
The Controlling Officer further informed the Committee that following the transfer of Solwezi Airport from Government to ZACL in 2018, there was need to review the recommended mitigation for the depression to ensure that the solution did not only prevent soil erosion but also satisfied the Standards and Recommended Practices (SARPS) for clearway, as required by the Zambia Civil Aviation Authority (ZCAA).
In view of this, the design solution was revised and agreed upon between ZCAA and ZACL from the initial gabion mattress wall to completely burying the depression with rock fill in order to satisfy ZCAA and SARPS.

The contractor expressed inadequacy to provide the required equipment to deliver the change in scope hence the contract was terminated.
Going forward, Management was engaging with the Zambia National Service (ZNS) and was in the process of procuring the services from ZNS to complete the remaining works.

Committee’s Observations and Recommendations The Committee notes, with concern, that in as much as the revised and agreed upon contract variations involved the Technical Services Unit, the outstanding costs may lead to incurring more costs, as ZNS may not manage to execute the remaining works within K 1,100,000.
The Committee is displeased, as this will be deemed a wasteful expenditure.

The Committee directs that the money paid to the contractor for the works not done should be recovered.

The Committee will await a progress report on the matter.

ii.

Flat Razor Wire (Security Fence) The Controlling Officer submitted that the observation by the Auditor General that the contractor had erected 7 kilometres, out of the 8 kilometres of razor wire fence, leaving works costing K217,550 outstanding was correct.
He further submitted that 1 kilometre outstanding stretch was part of the disputed land arising from encroachment and that the stretch had not been paid for.

The Committee learnt that the stretch would be fenced once the land issues had been resolved.

Management was further engaging ZNS with a view to have them complete the on-spot grading works outstanding on the flat razor wire.

150 Committee’s Observations and Recommendations The Committee will await a progress report on the matter.
19.4 Staff Matters 19.4.1 Irregular Payment of Salaries in Advance The Controlling Officer submitted that the observation by the Auditor General that on 30th June, 2019, ZACL terminated the contracts for former directors of Finance and Air Navigation Services and paid amounts totalling K1,142,102.46, as salaries in advance on cessation of employment before the end of their contracts, was correct.
He further submitted that following the appointment of a new Managing Director in 2018, Zambia Airports Corporation was repositioning itself and taking a new growth trajectory, which required operational efficiency and transformational leadership.

To this effect, it was proposed that staff changes be made at director level.

He further submitted that in view of the above, mutual separation agreements were made with the then Directors of Finance and Air Navigation Services.
The separation agreements provided for the payments of emoluments for the remainder of the contract duration as part of the separation package.

The separation agreements were made in the spirit of avoiding probable litigation, which would arise if the Corporation terminated the Directors‟ Contracts.

The Committee also learnt that the decision to terminate the contracts of employment were authorised by the then Board but the ZACL had been operating without a Board from September, 2021.
Committee’s Observations and Recommendations While noting that the decision to terminate the contracts of employment with the Directors had the blessings of the Board, the Committee is displeased that as opposed to having waited for the contracts of employment to lapse, Management did not act in the best interest of the company as colossal sums of money were lost in the process.

The Committee is of the view that the decision propagated by the Managing Director for strategic reposting lacked policy backing.
In this regard, the Committee condemns the decision and cautions the Controlling Officer to ensure that this anomaly does not recur.

The Committee further directs that the Ministry should ensure that a Board is instituted without further delay.

The Committee will await a progress report on the matter.
19.4.2 Failure to deduct Pay as You Earn (PAYE) K 428,288.42 The Controlling Officer submitted that the observation by the Auditor General with respect to non-deduction of K 428,288 from the money paid to the former Directors contrary to the Income Tax Act, Chapter 323, of the Laws Zambia was correct.

The Committee heard that PAYE was not deducted from the emoluments up to the end of the contract because it was agreed that the payment would form part of the separation packages.
This non-deduction of PAYE was in line 151 with the section 18 (f) of the Zambia Revenue Authority Practice Note No.1 of 2019, which allowed non-taxing of severance pay or compensation for loss of office which were non-taxable.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification upon, which if there are no further queries, the matter should be closed.
20.0 ZAMBIA DAILY MAIL LIMITED INDUSTRIAL DEVELOPMENT CORPORATION An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 and physical inspections of selected stations revealed various irregularities to which the Controlling Officer responded as outlined below.
20.1 Budget and Income The Acting Group Chief Executive Officer (AGCEO) informed the Committee that the observation by the Auditor General, with respect to a positive variance of K7,640,513 against a budget of K235,926,599, was correct.

He further submitted that, in 2020, the Company failed to meet the budgeted income mainly due to the impact of the COVID-19 pandemic and working from home arrangements.
In 2021, the Company recorded sales of K94.6 million, representing a percentage growth of 18 per cent over the previous year.

This was mainly due to the interventions implemented by Management to mitigate the impact of COVID-19 on its sales and operations.

The AGCEO further submitted that some of the mitigating measures included, but not limited to: provision of e-paper; increased sales points; and increased courier business.
The Committee learnt that to generate the sales amounting to K94.6million, the company incurred K90.4 million, resulting in a profit of K 4.2 million.

Committee’s Observations and Recommendations The Committee is elated to note that the Company recorded a positive variance on its budget and was able to record a profit.

The Committee resolves to close the matter but will keep it in view during future audits.
20.2 Information and Communications Technology Systems – Lack of Service Level Agreements The AGECO submitted that the observation by the Auditor General regarding the lack of Service Level Agreements (SLAs), was noted.

He further submitted that it was regrettable that the SLA was not provided at the time of the Audit.

The Liquid Telecom SLA was signed on 11th May 2016 and a copy was available for verification.
The Zamnet SLA was being negotiated and would be signed as soon as the negotiations were completed.

152 Committee’s Observations and Recommendations The Committee is disappointed to note that Management failed to avail the SLAs for Liquid Telecom, contrary to the section 11(1)(p) of the Public Finance Management Act No.

1 of 2018.

In this regard, the Committee recommends that disciplinary action should be instituted against all the officers who failed to execute their duties diligently.
The Committee will await an update on the matter and on the signing of the SLAs with Zamnet.

20.3 Financial Analysis 20.3.1 Statements of Comprehensive Income An analysis of the Statements of Comprehensive Income for the financial years ended 31st December, 2018, 2019 and 2020, revealed various irregularities to which the AGCEO responded as outlined below.

i.
i.

Gross Profit Margin Ratio The Controlling Officer submitted that the observation by the Auditor General, that the company‟s gross profit margin reduced from 46 per cent in 2018, to 36 per cent in 2020, was correct.

The Committee learnt that the decline in turnover, mainly due to the impact of the COVID-19 pandemic, had a negative impact on the gross profit margin.

Furthermore, the Company incurred higher costs arising from the impact of the depreciation of the Kwacha and inflationary impact on prices.
In 2021, the Company recorded higher revenues.

However, the impact of higher prices eroded the gross profit margin.

To mitigate cost escalations, Management had continued implementing interventions covering rightsizing, which was the single largest cost.

The Committee learnt that the deterioration in the exchange rate resulted in an increase in the cost of sales, as the company had to import much of its consumables and spare parts for the machines used in printing.
As a result, the gross profit for 2021 was K 40million, with a gross profit margin of 40 per cent.

Committee’s Observations and Recommendations The Committee notes, with concern, that the profits for the Company were eroded by deterioration in the Kwacha as Management had to import most of the consumables.
In this regard, the Committee urges the Controlling Officer and the Secretary to the Treasury to ensure that the consumables are availed on the market to avert the loss due to declining buying power, arising from exchange losses.

The Committee directs that all documents must be submitted to the Auditor General for verification, upon which if there are no further irregularities on the query, the matter should be closed.

153 ii.
153 ii.

Failure to Attain Break -Even Net Profit Target The Controlling Officer submitted that the observation by the Auditor General that Management failed to achieve the set performance to attain break-even net profit for the period under review was correct.

He further submitted that the Company had implemented various interventions not limited to the following, to improve overall performance: i. additional revenue streams from the courier business; ii.
upgrade of the e-paper platform to enhance the competitiveness of the newspaper; and iii.

implementation of the voluntary severance scheme.

The Committee learnt that these interventions had begun yielding results with the company recording its first profit in recent history of K4.2 million in the year ended 31st December, 2021.

The Committee also learnt that the profit was based on the Management Accounts and not the audited financial statements.
Committee’s Observations and Recommendations The Committee resolves to await an update on the audited financial statements, which will indicate the actual realised profit.

The Committee further directs the Controlling Officer to ensure that the measures implemented are sustained to assure a positive revenue generation.

The Committee will await an update on the two issues.
20.3.2 Statement of Financial Position An analysis of the Statements of Financial Position as at 31st December, 2018, 2019 and 2020 revealed the following.

i.

Liquidity Position a.

Deteriorating Current Ratio The Controlling Officer submitted that the observation by the Auditor General with respect to a deteriorating current ratio and failure to attain the performance contract of maintaining the current ratio at a minimum of 0.5:1 was noted and regrettable.
He further informed the Committee that the main driver of the low current ratio was the statutory liabilities which Zambia Daily Mail Limited was not able to liquidate due to constrained liquidity.

The Company was currently servicing all its statutory liabilities.

The Committee learnt that the policy current ration was two and in 2021 it was at 0.5.
Management was optimistic that following the voluntary severance scheme, the statutory obligations would reduce as the number of staff had reduced from 212 to 138.

He further submitted that the statutory obligations were too high and if cleared, the current ratio would greatly improve.

The Committee learnt that there was need to write-off some of the outstanding statutory obligations.
154 Committee’s Observations and Recommendations The Committee directs the Secretary to the Treasury to intervene in the matter and for the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await a progress report on the matter.

ii.
ii.

Insufficient Working Capital The Controlling Officer submitted that the observation by the Auditor General regarding the deteriorating working capital of the company was correct and regrettable.

He further submitted that inadequate working capital was due to reduced level of sales.

This performance gap was being addressed through the introduction of additional revenue streams from courier business and enhancement of the e-newspaper.
The major component of the liability related to legacy unremitted statutory obligations of which shareholder engagement had commenced for its liquidation.

Committee’s Observations and Recommendations The Committee will await an update on the liquidation of the legacy unremitted statutory obligations.

iii.

Poor Debt Management K 54,215,428 The Controlling Officer submitted that the observation by the Auditor General was noted.
Zambia Daily Mail Limited (ZDML) had engaged a team of full and part-time debt collectors who were pursuing the collection and recovery of long outstanding debts.

ZDML had further revised its credit policy to include stringent vetting criteria to ensure that credit was extended only to credit-worthy clients.

Government debt was being pursued by proactive engagement of Ministries, Departments and Spending Agencies.
Furthermore, all outstanding debts that had been assessed as irrecoverable had been earmarked for write-off and awaited Board approval.

The Committee learnt that the irrecoverable amount was K 4.6 million, which arose from entities that had gone under liquidation.

For, others the court process had been completed and bailiffs engaged but to no avail.

The Committee also heard that non-Government debt amounted to K44.7 million.
The Committee learnt that intervention had been put in place to ensure that all credits were supported with relevant documents such as local purchase orders.

Committee’s Observations and Recommendations The Committee is disappointed to note that non-government debt amounts to K 44.7 million, with an indication that recovery is questionable.

The Committee directs the Controlling Officer to ensure that this money is recovered considering that there are already plans to write-off K 4.6 million.
The Committee further directs that proper credit management systems must be put in place with undue delay.

The Committee will await an update on the matter.

155 iv.

Failure to meet Circulation Target The Controlling Officer submitted that the observation by the Auditor General that ZDML failed to reach the circulation growth target of 3.5 per cent per year and averaged around negative 4 per cent to negative 22 per cent, was true and regrettable.
He further submitted that the reduction in the circulation over the period 2018 to 2020 had been attributed mainly to COVID-19 pandemic and growth in popularity of social media.

The social media had shifted a significant share of the business from newspaper business as it was considered cheaper, easily accessible, and faster than the traditional print news.
ZDML was responding to this shift in the market by increasing sales points; enhancement of e-paper to accommodate multiple payment channels; undertaking regular readership surveys to achieve tailored content and strategic partnerships to grow the e-paper.

Committee’s Observations and Recommendations The Committee resolves to await an update on the improvement of the circulation target.
20.4 Operational Matters 20.4.1 Failure to Reconcile Unsold Copies of Newspapers The Controlling Officer submitted that the observation by the Auditor General that 2,760,310 copies of newspaper, valued at K23,462,635 out of the total production of 9,357,881 copies valued K79,541,989, were unaccounted for was true.

He further submitted that there had been weaknesses in the systems around reconciliations.

However, Management had enhanced procedures for the reconciliation of unsold newspapers.
He further informed the Committee that ZDML ran a demand driven print order and disposal was only undertaken after all the processes and procedures were followed to the letter.

The reconciliations were available for verification.

Committee’s Observations and Recommendations The Committee finds the Controlling Officer‟s submission inadmissible, as the “demand driven print order” did not serve its purpose in view of the huge number of copies that had been printed and remained unsold.
The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which if there are no other queries, the matter should be closed.

20.4.2 Failure to Implement Board Directive The Controlling Officer submitted that the observation by the Auditor General with regard to the directive from the Board for ZDML not to renew its contract with Daily Nation Newspaper for courier services, was noted and correct.
The Committee learnt that while the Board had directed Management not to renew the contract, it also asked ZDML Management to review the financial impact, if any, of providing the courier service to the Daily Nation.

Management accordingly, undertook the assessment which demonstrated no evidence of negative impact on the sales numbers as a direct result of providing 156 the courier service.

The courier service to Daily Nation was earning the Company approximately K200,000 per annum.
On the basis of the findings of the assessment, the service was continued and accordingly reported to the Board, but the Board only noted and did not necessarily approve the decision to continue providing the courier services.
Committee’s Observations and Recommendations The Committee finds the Controlling Officer‟s submission inadmissible and directs the Controlling Officer to re-evaluate the matter as the Committee finds it unacceptable that Management opted to go ahead with a decision which the Board had not approved.

The Committee will await an update on the amicable decision on the matter.
20.5 Procurement Matters 20.5.1 Simply Black Advertising and Consulting Services The Controlling Officer submitted that the observation by the Auditor General was noted.

He further submitted that the discount rate was approved by the Board in 2015.

Subsequently, following guidance from the new Board the rate had been revised to 40 per cent.

The maximum discount in the Credit Policy for Management was 30 per cent and any discount above that needed Board approval.
All the amounts owed by Simply Black, in relation to the aforesaid contract had all since been collected.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, after which of there are no further queries, the matter should be closed.
20.6 Accounting Irregularities 20.6.1 Lack of Fraud Prevention Policy The Controlling Officer submitted that the observation by the Auditor General that ZDML did not have a Fraud Prevention Policy, leading to a loss of amounts totalling K122,545, was true and regrettable.

He further submitted that the formulation of the Fraud Prevention Policy was planned for the second quarter of 2022 when it was expected that a new Board would be in place.
This was in addition to the implementation of other audit and risk activities outlined in the plan for 2022.

ZDML was confident that the above initiative would enhance the Company‟s fraud risk management.

Committee’s Observations and Recommendations The Committee is disappointed to note that ZDML operated without a Fraud Prevention Policy during the period under review.
The Committee directs that disciplinary action should be 157 instituted against all staff who failed to execute their duties to ensure that this Policy was formulated.

The Committee will await an update on the matter.


20.6.2 Failure to Settle Statutory Obligations K 166,508,460 The Controlling Officer submitted that the observation by the Auditor General regarding the outstanding statutory obligations owed to NAPSA K3,443,156 and ZRAK163,065,304 in respect of pension contributions and taxes respectively, was correct.

The Committee learnt that the amounts outstanding to NAPSA were being serviced through debt swaps.
The outstanding amount represented a legacy debt from the years when ZDML was not submitting the monthly contributions.

ZDML was current and paid monthly contributions as they fell due.

In relation to ZRA obligations, ZDML had entered into a payment plan with ZRA and was paying agreed instalments.

Committee’s Observation’s and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.
The Committee will await a progress report on the clearing of the outstanding statutory obligations.

20.7 Staff Related Matters 20.7.1 Delayed Remittance of Pension Contributions The Controlling Officer submitted that the observation by the Auditor General that ZDML only contributed K1,208,987 for two months as opposed to K14,507,846, leaving a balance of K13,298,859 unremitted as at 31st May 2021, was correct and regrettable.
The Controlling Officer submitted that ZDML had two pension schemes, the old defined benefit scheme, which was at the time of reporting, in its runoff period; and the defined contribution scheme which was being operated.

The assessed deficit on the defined contribution scheme at the time of conversion to the defined contribution scheme in 2018 was K73 million and was to be funded over a period of ten years, at the rate of K7 million per year.
As at the time of reporting, ZDML had paid K21 million in terminal benefits, thereby reducing the amount to K52 million, as at 31st January, 2022.

An additional K4 million had been earmarked for payment in the first quarter of 2022 to reduce the balance to K48 million.

The Company was up to date on the defined contribution scheme.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.
The Committee will await an updated on the old defined benefit scheme.

158 20.7.2 Overpayment of Education Allowance The Controlling Officer submitted that the observation by the Auditor General regarding overpayment of education allowance to middle management was noted.

However, the Conditions of Service stipulated that employees be paid an education allowance of K3,500 net or K5, 385 gross.
However, when tax rates changed, the Company maintained the net of K3, 500, so as not to disadvantage the employee.

Based on the new tax rates, this translated into a gross of K5,600.

Management would review the Conditions of Service so that the entitlement for education allowance would be stated in terms of the gross amount only, to avoid similar problems when tax rates changed.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will await an update on the matter.


21.0 ZAMBIA EDUCATIONAL PUBLISHING HOUSE: MINISTRY OF EDUCATION An examination of financial and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 maintained at the Zambia Educational Publishing House (ZEPH) revealed various irregularities to which the Controlling Officer submitted as outlined below.
21.1 Governance 21.1.1 Lack of Board of Directors The Controlling Officer submitted that the observation by the Auditor General that contrary to Zambia Education Publishing House Act, Chapter 145 of the Laws of Zambia, the Zambia Education Publishing House (ZEPH), had no Board, as at 31st August, 2021 following the expiration of tenure of the last Board in 2015, was correct.
The Controlling Officer further submitted that ZEPH awaited the appointment of the Board of Directors by the Minister of Education, in accordance with Zambia Education Publishing House Act of 1992.

As at January, 2022, the Minister had nominated names to be put on the Board and had since submitted them for vetting.

The Controlling Officer assured the Committee that the Board would be installed before the end of the first quarter of 2022.
Committee’s Observations and Recommendations The Committee observes, with dismay, that the same query was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2017.

The Committee finds it unacceptable and unbelievable that it can take such an inordinate time to appoint a substantive Board.
The Committee observes, further, that failure to appoint a Board goes against the tenets of good corporate governance and robs the institution of strategic direction.

In this regard, the 159 Committee recommends that in accordance with section 55 of the Public Finance Management Act No.

1 of 2018, the Minister should appoint the substantive Board without further delay.

The Committee will await an update on the matter.


21.1.2 Lack of Strategic Plan The Controlling Officer submitted that the observation by the Auditor General that ZEPH operated without a Strategic Plan from 2006, was true and unfortunate.

She further informed that Committee that a new Strategic Plan was at draft stage and awaited the appointment of Board of Directors for ratification.

However, during the period under review, the Institution operated under a draft Strategic Plan.
Committee’s Observations and Recommendations The Committee observes, with concern, that the same query was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2017.

The Committee finds it irregular that a Government institution has been operating without a Strategic Plan for over fourteen years.
While noting that the Strategic Plan is in draft stage, the Committee is disappointed that the Controlling Officer failed to substantiate as to why there was no Strategic Plan.

The Committee directs that the process to finalizing the Strategic Plan should be expedited and that going forward, the query should not recur.

The Committee will await an update on the matter.


21.2 Budget and Income The Controlling Officer informed the Committee that the observation by the Auditor General that during the period under review ZEPH had a negative variance of K 114,490,346, against a budget of K 176,812,184, was correct.

She further submitted that the Institution had low working capital and inadequate business from the Ministry of Education which culminated into low revenue.
Furthermore, she informed the Committee that Management had implemented a plan to increase reprints of existing text books and develop new curriculum textbooks for sale in the branches across the country from 2021 to 2025.

The Committee learnt that ZEPH had over 400 titles in local languages but lacked working capital to print the copies in bulk.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee finds it unacceptable that ZEPH, which has over 400 titles, has failed to find financing to print the books so as to generate sufficient revenue.

The Committee is also disappointed to note that the Government has not prioritised offering business to ZEPH.

The Committee directs the Controlling Officer to ensure that ZEPH diversifies its product offering, instead of relying solely on the Government market.
The Committee further urges the Government to support ZEPH by firstly capacitating it and then offering business to it.

The Committee will await a progress report on the improvement of the operations of ZEPH.

160 21.3 Financial Analysis 21.3.1 Statement of Comprehensive Income An analysis of the Statements of Comprehensive Income for the financial years ended 31st December, 2018, 2019 and 2020 revealed the following: i.
Deteriorating Sales and Subsequent Losses The Controlling Officer submitted that the observation of the Auditor General, that during the period under review, ZEPH recorded deteriorating turnover and subsequently posted losses, was correct.

She further submitted that Management had focused on an increase in turnovers through a reprint of textbooks with envisaged sales of K 39.99 million in 2022; K 47.99 million, in 2023 and K59.99 million, in 2024.
The Committee learnt that the turnovers would be generated from contracts of sale of text books, reprints of existing books for stocking in branches and undertaking of job from commercial entities to counter the rising cost of operations and subsequently overcome liquidity challenges.
The Committee learnt that in as much as the entity only realised a paltry K6 million in 2021, the Institution was optimistic that following the change in the funding mechanisms for the Ministry of Education, ZEPH would sign contracts with the Ministry which would result in increased turnover.
Committee’s Observations and Recommendations The Committee reiterates its recommendation on the need for the Government, through the Ministry of Education to ensure that ZEPH is provided with the requisite working capital, which will eventually enable it to deliver on the various business contracts which the Ministry of Education should, without reservation, accord the entity.

The Committee will await an update on the matter.

ii.
ii.

Failure to Meet Operational Targets The Controlling Officer submitted that the observation by the Auditor General that ZEPH failed to meet its sales targets of 98 per cent in 2019 and 50 per cent in 2020, was correct.

She further informed the Committee that Management had developed mathematics and science textbooks, which in turn, would be printed to increase sales in the branches across the country.

This measure was expected to improve operational targets.
The Committee learnt that Management had participated in a World Bank competitive tender for mathematics and science textbooks component, to overcome low operational targets.

The Committee also learnt that once the tender was finalised, ZEPH would realise US$ 2 million.

The institution was also seeking to get more contracts from the Ministry, Government Departments and other Spending Agencies.
161 Committee’s Observations and Recommendations The Committee directs the Controlling Officer to ensure that ZEPH is competitive in its operations for it to be able to prove its relevance on the market and attract business opportunities.

The Committee will await an update on the actualisation of the tenders with World Bank and the Ministry of Education.
21.3.2 Statement of Financial Position An analysis of the Statements of Financial Position as at 31st December, 2018, 2019 and 2020 revealed the following: i.

Current Ratio The Controlling Officer submitted that the observation by the Auditor General, that ZEPH‟s current ratio was below the industry accepted standard of acceptable ratio of 2:1 as it deteriorated from 1.3:1 in 2019 to 1.1:1 in 2020.
She further submitted that the Institution had low sales due to the Covid-19 pandemic as its major clients, schools, colleges and universities had closed, hence the low sales which affected the current ratio.

The Controlling Officer further, informed the Committee that ZEPH was reprinting textbooks, participating in tenders and also reverting to working in the new normal, which would improve its current ratio.
The Committee also learnt that the main contributing factor to the poor current ratio was an increase in liabilities, which arose from increased penalty charges on unpaid statutory obligations.

The Controlling Officer submitted that the financial statements for 2018 to 2020 had been audited and showed an improvement in the current ratio.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification and the Committee will await an update on the management of the current ratio.

ii.

Outstanding Receivables The Controlling Officer submitted that the observation by the Auditor General that ZEPH did not have a Debt Management Policy and consequently was owed amounts totalling K 12,845, 143 in outstanding receivables, was correct.
She further submitted that the Ministry had liquidated its debt and had a balance of K 3.8 million and that a draft Debt Management Policy was in place, awaiting the Board of Directors to validate it.

Furthermore, Management had made efforts to collect debts and had collected K8,663,255 during the year 2021.

Committee’s Observations and Recommendation The Committee is dismayed to note that ZEPH operated without a Debt Management Policy.
The Committee recommends that the Controlling Officer must intervene in the matter to ensure that 162 the Ministry clears the outstanding K 3.8 million.

The Committee will await an update on the matter.


21.4 Operational Matters - Failure to Publish Material Using the Updated School Curriculum The Controlling Officer submitted that the observation by the Auditor General regarding failure to publish material using the updated school curriculum, which resulted in failure to realise target sales of K46,548,000, was correct.
She further submitted that ZEPH would print in bulk the cited revised curriculum grades, while gradually selling out the old curriculum textbooks because even the old curriculum textbooks were still being used as supplementary learning materials.

The Committee learnt that due to insufficient working capital, ZEPH was only printing what it could afford and would only do bulk printing if it was supported either through tenders or financing.
Committee’s Observations and Recommendations The Committee will await an update on the matter.

21.5 Accounting Irregularities 21.5.1 Failure to Remit Statutory and Other Obligations K154,178,061 The Controlling Officer informed the Committee that the observation by the Auditor General regarding failure to remit statutory and other obligations to National Pension Scheme Authority (NAPSA) and the National Health Insurance Management Authority (NHIMA), was noted and acknowledged.
She further submitted that as at 31stDecember, 2021, ZEPH had redeemed the debt owed to NHIMA, on arrears amounting to K51,376.00 and that, ZEPH was current with its payments.

The Committee learnt that a judgment had been passed in January, 2022 and a payment plan had been issued for payments towards the NAPSA arrears and an initial payment of K104,703.70 was made.

The Committee also heard that K75,000.00 monthly payments towards arrears were being made from the monthend of February, 2022.
The Institution was also paying NAPSA monthly contributions towards its statutory obligations.

Committee’s Observations and Recommendations While noting that poor working capital was the main cause for failure to clear statutory obligations, the Committee directs the Controlling Officer to ensure that a time line is provided as to when the payment plan will be concluded.
Furthermore, the Committee directs the Controlling Officer to prevail on Management to put in place stringent measures to avert recurrence of the query.

The Committee will await a progress report on the matter.

163 21.5.2 Inadequately Supported Payments K200,827 The Controlling Officer submitted that the observation by the Auditor General regarding inadequately supported payments, was noted and acknowledged.
The Controlling Officer submitted that accounting documents, amounting to K178, 086.82, had since been retrieved.

She further submitted that ZEPH was still striving to retrieve documents for the balance totalling K22,540.00.

Committee’s Observations and Recommendations The Committee notes, with consternation, the inadequately supported payments during the period under review.

The Committee finds it unacceptable that documents were only retrieved after an audit exercise.
This casts doubt on the authenticity of the documents in question.

The Committee recommends that disciplinary action should be instituted against all the officers who failed to perform their responsibilities in accordance with section 82(j) of the Public Finance Management Act No.

1 of 2018.

The Committee will await an update on the matter.


21.5.3 Unretired Imprest K35,240 The Controlling Officer submitted that the observation by the Auditor General regarding unretired imprest was noted and acknowledged.

She further submitted that retirement documents amounting to K35,240.00, had since been retrieved.
Committee’s Observations and Recommendations The Committee reiterates its observation that presenting accountable documents after an audit exercise is unacceptable and must be stopped forthwith.

The Committee recommends that disciplinary action should be instituted against all the officers in question in accordance with section 104 (5) of the Financial Regulations of 2020.
21.5.4 Unaccounted for Revenue K156, 128.00 The Controlling Officer submitted that the observation by the Auditor General that there was under-banking of K 156, 128, out of the generated sales of K 586,867 was correct and regrettable.

She further submitted that the observation with respect to ZEPH‟s property in Mansa, which was leased out for a period of eleven months, but the rentals amounting K14,300 were not availed for audit as at 31st August, 2021, was regrettable.
The Controlling Officer informed the Committee that Management had instituted disciplinary action against all erring officers and a sum of K 6,103.34 out of the K156, 128.00, had since been recovered.

She further informed the Committee that verification was underway to ascertain the uncollected revenue which resulted in under banking.

The Committee learnt that revenue totalling K14,300 collected from rentals was used to pay utility bills before being banked and this was regrettable.
164 The Controlling Officer also submitted that during the period under review, ZEPH did not have internal auditors nor accountants due to liquidity challenges which impended recruitment of the required staff and that the ZEPH had manual accounting systems.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee is dismayed with the unacceptably high levels of financial indiscipline exhibited at ZEPH during the period under review.
The Committee notes from the documentary evidence that one of the officers who was disciplined for financial misconduct committed a similar offence and Management opted to be lenient as opposed to reporting the matter to the Police.

The Committee finds it awkward that Management does not know how much revenue was uncollected resulting in under-banking.
The Committee directs the Controlling Officer to ensure that disciplinary action is instituted on Management for this lapse in accordance with section 52 of the Public Finance Management Act No.

1 of 2018 and to ensure that control systems are enhanced and ZEPH must migrate from using manual accounting systems.

The Committee further requests the Auditor General to undertake a forensic audit on the matter and that all officers who will be found wanting should be reported to the Police.
21.5.5 Missing Receipt Books The Controlling Officer submitted that the observation by the Auditor General regarding missing receipt books, was noted and acknowledged.

She further submitted that Management had retrieved the missing receipt book from Mongu.

She further submitted that the query arose because at the time of audit, the receipt book was not signed for by the recipient branch at the time of collection.

The Committee learnt that all the funds receipted had been correctly banked.
Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee observes, with disappointment, that a receipt book was collected without being signed for, in accordance with section 107 of the Financial Regulations for 2020.

The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification, upon which, if there are no further irregularities, the matter should be closed.
21.6 Administrative Matters 21.6.1 Failure to Secure Title Deeds The Controlling Officer submitted that the observation by the Auditor General, with respect to failure to secure title deeds on seven parcels of land, valued on K 112,385, was correct.

She further submitted that the acquisition of title deeds had progressed as shown in the table below.

165 No.
Property Location Responses Description Common Building Independence, Kabwe It was being pursued by the Legal Counsel Common Building Limulunga Rd Mongu Common Building Common Building Independence Solwezi Kasama way Common Building Kuta way Livingstone Common Building Rd Commercial Land Chimpampwe Mansa Chipata It was being pursued by the Legal Counsel to remove the court order It was being pursued by the Legal Counsel to remove the court order and apply for a duplicate title Ministry of Justice advised that a private Legal Counsel should pursue the matter with Ministry of Lands and Natural Resources The title was available Mansa Municipal Council had commenced the processing of the title deed.
The information and documentation were submitted to Ministry of Lands and Natural Resources in Chipata for processing of the Certificate of Title The Committee learnt that in as much as there was progress on the acquisition of title deeds, two properties domiciled in Mongu and Solwezi had court orders which were a hindrance to the process of title acquisition.
The Controlling Officer submitted that following the failure by ZEPH to pay retirement benefits, the retirees went to court with a resolve to sale the properties in the branches.

ZEPH had since paid off the retirees and the process of removing the caveats on the two properties was underway.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.
The Committee will await a progress report on the matter.

21.6.2 Poor State of Infrastructure The Controlling Officer submitted that the observation by the Auditor General regarding the poor state of infrastructure, was noted and acknowledged.

The Controlling Officer submitted that Management had since painted the Choma Branch and the remaining works would be completed once funds were made available.
She further submitted that as for the poor state of the unoccupied Manager‟s residence in Livingstone, renovations would be done once funds were available as the house required complete rehabilitation.

Committee’s Observations and Recommendations The Committee will await a progress report on the matter.
166 22.0 ZAMBIA MEDICINE REGULATORY AUTHORITY: MINISTRY OF HEALTH An examination of financial and other records for the Financial Year Ended 31stDecember, 2020 maintained at Zambia Medicine Regulatory Authority Headquarters in Lusaka and three regional offices in Chipata, Livingstone and Kitwe, revealed various irregularities to which the Controlling Officer responded as outlined below.
22.1 Budget and Income The Controlling Officer submitted that the observation by the Auditor General that during the period under review, Zambia Medicine Regulatory Authority (ZAMRA) recorded a positive variance of K 1,815,529, against a budget of K 101,738,271, was correct.

Committee’s Observations and Recommendations The Committee is elated to note that ZAMRA recorded a positive variance against its budget during the period under review.
The Committee urges the Controlling Officer to ensure that ZAMRA continues to undertake its mandate in an efficient and effective manner.

22.2 Operational Matters 22.2.1 Delayed Verification of Samples - National Laboratory The Controlling Officer submitted that the Authority acknowledged the findings of the Auditors regarding the samples that failed preliminary tests using mini laboratory kits.
The Controlling Officer further submitted that the five samples that were sent to National Laboratory Centre for confirmatory tests were actually received, and confirmatory tests confirmed that the samples had complied with the prescribed specifications.

He further informed the Committee that results for the four samples were received by 21st June, 2020, while the fifth was concluded by 14thOctober, 2021.

The Certificates of Analysis (CoA) were available for verification.
The Committee learnt that the tests on the fifth sample, Lofnac 100 (Diclofenac) SR tablets, could not be concluded because the Fourier-Transform Infrared Spectroscopy (FTIR) Spectrometer, which was required to perform the identity test of the sample, was faulty.

The test was conducted following the repair of the FTIR Spectrometer and the sample was found to be compliant.
The Controlling Officer further submitted that Management acknowledged that the results on the Lopinavir + Ritonavir 200/50mg sample manufactured by Hetero Laboratory were not provided because the Authority could not trace the receipt of the same sample.

However, after thorough investigations, it was discovered that the sample in question was subjected to a disintegration test, a parameter which was not part of the manufacturer‟s product specification.
The Controlling Officer informed the Committee that notwithstanding the aforesaid, the Authority had a robust pharmacovigilance system through which all healthcare workers and 167 members of the public reported suspected adverse drug reaction (ADR) and product quality problem (PQP).As part of its due diligence, quality verification on Lopinavir + Ritonavir 200/50mg tablet, batch number E192079, was conducted and there was no report of Adverse Drug Reaction (ADRs) or Product Quality Problem (PQPs) received by the Authority.
However, the Authority acknowledged the omission of not providing feedback and the lapse in handling of samples and had since streamlined the Post Marketing Surveillance system through review of the relevant quality procedures and training of staff as a remedy.

The Committee learnt during the period under review, the Authority had challenges with staffing levels, availability of reagents.
The Committee also heard that despite the delay in providing feedback from the laboratories, the medicines that were under-going tests would be withdrawn from the market until the results on the same were ascertained.

Committee’s Observations and Recommendations The Committee notes, with concern, that the processes of testing and recalling of products already on the market are ineffective, considering the inordinate time it took to provide feedback on the medicines that were being tested.
The Committee observes that in as much as the Authority has a robust pharmacovigilance system through which all healthcare workers and members of the public can report suspected Adverse Drug Reaction (ADR) and Product Quality Problem (PQP), the system is not well publicised and hence is not effective in getting information from the public on suspected adverse drugs.
In light of this, the Committee recommends that the system of testing and recalling products on the market should be enhanced and made to be timely.

The Committee further urges the Controlling Officer to ensure that the Authority has the relevant capacities to enable it deliver on its mandate efficiently.

The Committee will await a progress report on the matter.
22.2.2 Non-compliant Pharmacies K311,310 The Controlling Officer submitted that the observation by the Auditor General was well noted and the Authority acknowledged that some pharmacies did not appreciate the requirements stipulated in the Medicines and Allied Substances Act No.

3 of 2013.
3 of 2013.

The Controlling Officer informed the Committee that the Authority conducted routine inspections of the pharmacies to enforce compliance but during the period under review, the Authority could not conduct the inspections due to Covid-19 pandemic that caused movement restrictions.

The Controlling Officer informed the Committee that the Authority had put up measures to enforce compliance through increased inspections and enhancement of logistical support.
Consequently, out of the reported outstanding annual returns fees of K311,310, the sum of K211,340, relating to eighty-eight pharmacies had since been received, leaving a balance of K99,970.

In addition, all pharmacies that did not submit their annual returns on time, were penalised and the sum of K202,920, was raised in penalties.

Notices of intent to suspend or cancel certificates of registration had also been served on defaulting pharmacies.
168 The Committee learnt that the Authority did not suspend any certificate for the pharmacies that had not submitted their annual returns, as most of them had committed to do so.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee is elated to note that the Authority has penalised the pharmacies that had defaulted and that measures had been put in place to enhance compliance.
The Committee urges the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which if there are no queries, the matter should be closed.

22.2.3 Malfunctional Incinerator – ZAMRA Headquarters The Controlling Officer submitted that the Authority acknowledged the audit findings regarding non-functional incinerators.
He further submitted that the Authority faced challenges with the provision of the usual routine preventive maintenance services on the incinerators due to the outbreak of Covid-19 Pandemic that made it difficult for the technician from Zimbabwe to travel to Zambia to maintain the equipment and the acquisition of the required spare parts took longer.

The Committee learnt that the Authority had since procured the required spare parts and arrangements to repair the incinerators were in the process.
Regarding the reported accumulated pharmaceutical waste, the Committee was informed that the Authority contracted the University Teaching Hospital in December, 2021 to incinerate the same.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee urges the Controlling Officer to ensure that the Authority has a long-term measure to ensure that there is non-disruption in the process of disposing expired drugs and allied substances, rather than depending on the University Teaching Hospital.
The Committee directs that all documents in support of the submission, should be submitted to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed but kept in view for future audits.

22.3 Asset Management – Failure to Secure Title Deed K 170,370,062 The Controlling Officer submitted that Management acknowledged the findings by the Auditors on the issue of ZAMRA not securing a title deed for its Headquarters office building and laboratory.
He further submitted that ZAMRA, together with four other institutions namely, Radiation Protection Authority (RPA); Zambia Bureau of Standards (ZABS); and Chest Disease Laboratory (CDL), were allocated pieces of land in 2015, by the National Institute of Scientific and Industrial Research (NISIR), with guidance from Ministry of Technology and Science and through the Ministry of Health.
The Committee learnt that according to the draft Memorandum of understanding, it was stated that: - “The land allocated to THE FOUR GOVERNMENT INSTITUTIONS on Lot 2350/M as specified in Clauses 1.

(a), (b), (c) and (d) of this AGREEMENT shall remain on NISIR 169 for Lot 2350/M.

However, THE FOUR GOVERNMENT Certificate of Title INSTITUTIONS shall use the land in perpetuity, subject to provisions of Clause 1(c) of this AGREEMENT”.
The Controlling Officer informed the Committee that, notwithstanding the above stated clause, Management wrote to NISIR requesting them to consider subdividing Lot 2350/M and to permanently assign the portion of land where the ZAMRA offices, Incinerator compound and car park were situated, so that title deeds could be secured.

Committee’s Observations and Recommendations The Committee resolves to await an update on the matter.
22.4 Failure to Fill Key Vacant Positions The Controlling Officer submitted that Management acknowledged the audit findings by the audit team regarding vacant positions in the staff establishment.

He further informed the Committee that during the period under review, the Authority had financial constraints and consequently could not fill the vacancies, as well as the absence of the Board which had the mandate to approve recruitment of employees.
The Committee learnt that, Management had developed a phased approach to fill the vacant positions in the establishment which would be implemented gradually to ensure that the cost for personnel emoluments was well managed, depending on the availability of financial resources.

At the time of reporting, 128 positions had been filled and the Authority had budgeted for recruitment of thirty-seven employees to fill the vacant positions in the 2022 to 2024 Medium Term Expenditure Framework Action Plan.
Committee’s Observations and Recommendations The Committee is dismayed to note that there is no substantive Board in place.

The Committee directs that the Ministry should without further delay, institute the Board and ensure that the relevant staff are employed.

The Committee will await an update on the matter.


23.0 ZAMBIA RAILWAYS LIMITED: INDUSTRIAL DEVELOPMENT CORPORATION A review of accounting and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 conducted at the Zambia Railways Limited (ZRL) headquarters and selected stations revealed various irregularities to which the Controlling Officer responded as set out below.
170 23.1 Management 23.1.1 Overpayment of Gratuity – Management Employees K1,025,924 The Acting Group Chief Executive Officer, who was the Controlling Officer, submitted that the observation by the Auditor General, with regard to payment of gratuity to staff at 35 per cent as opposed to 25 per cent was correct.
The Controlling Officer informed the Committee that the gratuity rate for contractual employees was adjusted from 25 per cent to 35 per cent, effective 1st January, 2015, following advice from the Auditor General that contracts should not reflect the net gratuity.

Therefore, there was no overpayment as the workers ultimately benefitted from the change in the law which then declared gratuity tax free.
The Committee learnt that the contracts were adjusted without the approval of the Board and that the contracts were amended after the audit query.

Committee’s Observations and Recommendations The Committee finds the Controlling Officer‟s submission inadmissible and condemns the action to have effected payments without Board approval.

The Committee is of the view that the change in rate of payment of gratuity was more of a gentleman‟s agreement and did not follow the right procedure.
The Committee recommends that the funds in, question should be reimbursed and disciplinary action meted out on all the officers responsible for the query.

The Committee will await a progress report on the matter.

23.1.2 Questionable Payment of Tax Relief to ZRL Management Employees K1,439,180 The Controlling Officer submitted that the observation of the Auditor General was noted.

He further submitted that it was correct that Zambia Railways Limited (ZRL) paid tax on leave pay for officers in Management.
The Committee heard that the conditions of service for Management were silent on the tax treatment of leave pay and the practice in ZRL for over twenty years had been to gross up the leave pay.

The Committee learnt that ZRL did not seek authority from the Commissioner General for Zambia Revenue Authority and that the previous Boards for ZRLs had authorised the act.
The Controlling Officer submitted that the Auditor General‟s observation was noted, and the position would be clarified when a new Board was put in place.

Committee’s Observations and Recommendation’s The Committee is bewildered by ZRL Management‟s decision to pay tax on behalf of the employees‟ contrary to the Income Tax Act of 2014, which in turn deprives the entity of operational funds.
The Committee condemns this practice and recommends that it should be stopped with immediate affect as no Board of Directors overrides legal provisions on income tax.

The Committee will await a progress report on the matter.

171 23.1.3 Unauthorised Payment of Maintenance Cost Allowance The Controlling Officer submitted that the observation by the Auditor General, with respect to the payment of maintenance cost allowance in amounts totalling K310,692 was correct.
He further submitted that the motor vehicle allowance was approved by the Board at its 109th Meeting held on 5th October, 2016.

The allowance was approved when the Board resolved to do away with personal-to-holder vehicles and introduced motor vehicle allowance under finance lease.

The motor vehicle allowance comprised lease repayments, insurance, and maintenance costs allowance.
He further submitted that the Board, at its 115th Meeting held on 14th September, 2018, approved the introduction of the car allowance and did away with the maintenance cost and insurance cost allowances for entitled employees, but resolved to bear the cost for the six employees, amounting to K 310,692 as the Motor Vehicle Finance Lease which included payment of the maintenance cost was an inherited issue.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification.

The Committee urges the Auditor General to reconcile the Boards resolutions as contained in the minutes.

The Committee will await an update on the matter.


23.2 Budget and Income The Controlling Officer submitted that the observation by the Auditor General with respect to a negative variance of K374,484,000, against its budget of K1,416,580,000 was correct.
He further submitted that at the time of budgeting, the assumptions included expectations of capital injections into ZRL, as well as growth in earnings from the implementation of Statutory Instrument No.7 of 2018, the Railways (Transportation of Heavy Goods) Regulations, which should have enhanced earnings for the Company once implemented.

However, these expected capital injections did not materialise resulting in the recorded performance.
The Committee learnt that a capital investment was being made for infrastructure and rolling stock which should significantly improve performance of the Company once completed.

The Committee heard that local sector could not find the infrastructure rehabilitation and hence the Company sought intervention from international financiers.
Committee’s Observations and Recommendations The Committee notes the response and directs the Controlling Officer‟s submission and resolves to await a progress report on the injection of capital to rehabilitate infrastructure.
172 23.3 Financial Analysis 23.3.1 Statement of Comprehensive Income An analysis of the statement of comprehensive revealed that total revenue increased by 53 per cent from K291,535,000 in 2018 to K445,502,000 in 2020, however the company made losses during the period under review and following were observed.

i.
i.

Freight Tonnage against Revenue The Controlling Officer informed the Committee, that the observation by the Auditor General that ZRL had planned to haul 3,507,700 tonnes but only managed 2,855,274 tonnes resulting in a negative variance of K 406,036,422 for 652,426 tonnes, was true.
He further informed the Committee that ZRL did not meet its tonnage targets due to non-implementation of planned capital injections and implementation of Statutory Instrument No.7 of 2018, the Railways (Transportation of Heavy Goods) Regulations.

The Committee learnt that a capital investment was being made for infrastructure and rolling stock which should significantly improve performance of the Company‟s ability to move planned tonnage.
The Committee heard that the capital investment would be from a consortium of railway players which included Team Sweden Railway Consortium, and two others.

The Committee learnt that the assessment of the rehabilitation and environmental assessment had been complete and it was expected that the project should be self-financing.

The timeline set for the project was four years.


Committee’s Observations and Recommendations While noting that IDC and ZRL have signed the contract with various Railways consortiums, the Committee questions how the project which is purported to be a government project sitting with the Ministry of Finance and National Planning, with the expected deliverances.
The Committee expresses concern, with regard to who will guarantee the financing, considering that the Ministry of Finance and National Planning has suspended all finance guaranteeing which form part of the debt for the Republic.

In this regard, the Committee urges the Secretary to the Treasury to follow-through on the contract so as to ensure that the Government is made fully aware about the repercussions of the contract that has been signed.

The Committee will await a progress report on the matter.

ii.
ii.

Over-expenditure The Controlling Officer submitted that the observation by the Auditor General that ZRL over spent on overtime and subsistence allowances by K4,117,526 in 2018 and K1,258,196 in 2019, was correct.

He further submitted that the poor state of the track and rolling stock resulted in derailments and extended working hours leading to high overtime.

Furthermore, subsistence allowance was mostly incurred by the technical team dealing with defects on rolling stock and derailments.
The Controlling Officer informed the Committee that Management was taking 173 measures to reduce the derailments while relaying of the actualistion of the capital injection which would led to rehabilitation of the infrastructure.

Committee’s Observations and Recommendations The Committee observes, with concern the increase in the expenditure on overtime and subsistence allowances and recommends that this be curbed.

The Committee resolves to await an update on the matter.
23.3.2 Statement of Financial Position An analysis of the Statements of Financial Position, as at 31st December, 2018, 2019 and 2020, revealed the following: i.

Poor Working Capital The Controlling Officer submitted that the observation by the Auditor General that ZRL had a negative working capital during the period under review, was correct.

He further submitted that the entity equally had a poor current ratio.
The Controlling Officer submitted that the poor state of the railway line and the obsolete equipment had an impact of high operating costs and low revenue generating capacity.

The Committee learnt that ZRL had started to implement the ZRL Modernisation Project that would result in the following: a. b. c. rehabilitation of 1,029km rail track; acquisition of 1,500 new wagons and 30 locomotives; acquisition and installation of a modern signaling system; and d. upgrade of workshop equipment.
These interventions would result in an increase in tonnage from 1million to 5million tonnes per annum, which would change the fortunes of the Company.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit a status report on the progress made on the Modernisation Project and the timeline for completion.

The Committee will await a progress report on the matter.

ii.
ii.

Management of Investments A review of the ZRL schedule of investments revealed that during the period under review, ZRL invested funds in three financial institutions and the following were observed.

174 a.

Investing without obtaining Quotations The Controlling Officer submitted that the observation by the Auditor with regard to failure to follow the ZRL Investment Policy, was noted.
The Committee learnt that ZRL did not obtain quotations from three reputable financial institutions and that ZRL invested K 10, 624,833 prior to acquisition of the quotations.

The Controlling Officer submitted that the quotations were obtained on 17th December, 2020 with a view to make the investment post this date.
ZRL Management opted to maintain the investment with Bank 2 which was already holding the investment as it was the best evaluated option with an ability to settle the obligations when the time fell due.

Committee’s Observations and Recommendations The Committee observes, with concern, that ZRL abrogated its own Investment Policy and questions the motive.

The Committee recommends the Controlling Officer to institute disciplinary action against all officers who abrogated the Investment Policy.
The Committee will await a progress report on the matter.

b.

Failure to Disclose Information on Investments to Board of Directors The Controlling Officer submitted that the observation by the Auditor General was noted.

He further submitted that Management accounts and financial reports to the Board now included disclosures on investments.

The minutes of the meeting were available for verification.
Committee’s Observations and Recommendations The Committee observes, with concern, the tendency by Management to sideline the Board in its decision making, even on matters which need Board approval.

The Committee further observes that the decision to inform the Board was only done after the audit query.

The Committee, therefore, recommends that disciplinary action should be instituted against all officers who failed to follow the prescribed administrative procedure.
The Committee will await a progress report on the matter.

iii.

Weaknesses in the Management of Receivables a.

Poor Administration of Real Estates a(i) Failure to Achieve 90 per cent Rental Collection The Controlling Officer acknowledged, as correct, the observation by the Auditor General that during the period under review, ZRL failed to reach its target of 90 per cent with regard to collection of rentals.
The Controlling Officer submitted that previously, the Company did not have dedicated resource to oversee its real estate function and this resulted in challenges collecting rentals as they fell due.

The Company had since recruited estate officers to oversee the 175 management of leases and rental collection.

This had resulted in 77 per cent collection rate for year 2021 for land and buildings and was expected to further improve in 2022.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit to the Auditor General, all documents in support of the submission for verification and if there are no further irregularities on the query, the matter should be closed but kept in view for future audits.
a(ii) Failure to Collect Rental Income The Controlling Officer submitted that previously, the Company did not have dedicated resource to oversee its real estate function and this resulted in challenges collecting rentals amounting to K18,271,160 and 14,276,031 as they fell due.

The Company had since recruited estate officers to oversee the management of leases and rental collection.
This had resulted in 77 per cent collection rate for year 2021 for land and buildings and was expected to further improve in 2022.

The Committee learnt that the 148 tenants who had vacated ZRL properties without settling rentals, could not be traced.

This was as a result of lack of systems to conduct thorough due diligence.

Going forward, Management was in the process of developing a robust Know Your Client (KYC) System to ensure clients were traceable even after they vacated the premises.
The Controlling Officer also informed the Committee that ZRL was working with law enforcement agencies to locate the tenants who had vacated the properties.

Committee’s Observations and Recommendations The Committee observes, with concern, the lethargic administrative attitude exhibited by ZRL Management with regard to the management of its properties.
The Committee finds it unacceptable that a Company of a high repute did not have a proper system to identify and locate defaulting tenants, who had vacated the properties in question irregularly.

The Committee directs the Controlling Officer to institute disciplinary action to ensure that the officers responsible treat the matter with the seriousness it deserves.

The Committee will await a progress report on the matter.
a(iii) Freight - Failure to Obtain Bank Guarantees K 162,093,709 The Controlling Officer submitted that the observation by the Auditor General with respect to failure to get bank guarantee from a bank acceptable before issuance of a credit, was correct.

The Committee learnt that included on the list of customers without bank guarantees, was Nyiombo Investment Limited which owed an amount of K2,406,045.
However, Nyiombo Investment Limited, was liquidated in 2017, thereby casting doubt on how ZRL would recover the debt that had been outstanding for more than three (3) years, as at 31st August 2021.

The Controlling Officer informed the Committee that K124.90 million, seventy-five percent (K93.8million) was attributed to debt from interchange, which was a framework within which 176 the railway companies exchanged equipment.

These amounts were usually resolved through debt swaps.
ZRL was currently pursuing debt swaps with the affected entities.

To mitigate future exposures, the Company came up with a Debt Management Policy, which required the issue of a bank guarantee, after it had experienced the challenges which led to the debt.

In addition, ZRL had introduced a Transport Agreement with ledger customers which bound the customers.

With regard to Nyiombo Investment Limited, ZRL had taken the matter to court and the court ruled in ZRL‟s favour.
Furthermore, there were considerations to left the corporate veil.

Committee’s Observations and Recommendations The Committee condemns the reactive management style exhibited by ZRL Management.

The Committee finds it unacceptable that a Company struggling with working capital and liquidity challenges is taking a lackadaisical approach in matters that can generate revenue for the Entity.
The Committee urges the Controlling Officer to enhance supervision of the Entity to ensure that such work attitude is rooted out.

The Committee recommends action should be meted against all Officers who occasioned the quarry.

The Committee will await a progress report on the matters.
23.4 Operational Matters 23.4.1 Trend Analysis of the Key Performance Parameters The Controlling Officer submitted that the observation by the Auditor General that the number of passengers decreased by 69 per cent from 282,081 in 2018 to 88,791 in 2020, resulting in reduction of passenger revenue by 57 per cent from K15,770,000 in 2018 to K6,744,000 in 2020, was correct.
He further submitted that the reduction in passenger ridership and revenue in 2020, was caused by the suspension of ZRL passenger services between April and September due to Covid – 19.

The Committee learnt that ZRL had formulated a business continuity plan to help mitigate losses in such calamites.

Committee’s Observations and Recommendations The Committee resolves to close the matter but keep it in view for future audits.
23.4.2 Failure to Achieve Key Performance Indicators The Controlling Officer submitted that the observation by the Auditor General that ZRL did not achieve its Key Performance Indicators (KPIs) for the years ended 31st December, 2018, 2019, and 2020, was correct.

The Committee learnt that the Company failed to meet benchmarks of thirteen key performance indicators in 2018 and eleven in both 2019 and 2020.
The failure to meet performance targets 177 resulted in losses of K249,368,000, K225,862,000 and K161,278,000 in 2018, 2019 and 2020 respectively.

The Controlling Officer submitted that failure to achieve the KPIs was due to the condition of ZRL‟s railway line which was in a state of grave disrepair and the Company‟s rolling stock was obsolete.ZRL was currently undertaking the ZRL Modernisation Project which would address the poor state of the infrastructure.
The Committee learnt that ZRL had progressed with the project as environmental and social due diligence had already been conducted.

After the implementation of the Modernisation Project, it was envisaged that thirty locomotives and 1500 wagons would be procured, and the tonnage for haulage would increase from 1million to 5million at full capacity.

The Committee was further informed that the expected financing was 978 Euros and US$ 1.2 billion, and the loan would sit on IDC balance sheet.
Committee’s Observations and Recommendations The Committee observes, with concern that the challenges for ZRL have been perennial considering that the same query has been cited by the Auditor General in the Report for 2017.

The Committee urges the Secretary to the Treasury to take keen interest in the Modernisation Project.

The Committee will await a progress report on the matter.
23.4.3 Increase in Derailments The Controlling Officer submitted that the observation by the Auditor General, with respect to an increase in the number of derailments was correct.

The Committee also learnt that a number of recommendations had been formulated in its Safety Report, which if implemented, would have helped to reduce the derailments.

The Committee learnt that none of the above recommendations had been implemented, as at 31stAugust, 2021 and the following were observed.

i.
i.

Skidded Rails The Controlling Officer submitted that the condition of ZRL‟s railway line was in a state of grave disrepair.

The life of the line was long exhausted, and urgently required an overhaul rehabilitation.ZRL was currently undertaking the ZRL Modernisation Project which, would address the poor state of the infrastructure.

Committee’s Observations and Recommendations The Committee notes the response and resolves to await a progress report on the matter.

178 ii.
178 ii.

Inadequate Ballast The Controlling Officer submitted that the observation by the Auditor General, with respect to inadequate ballast on the rail line between Kafue and Monze, and from Ndola to Kapiri Mposhi (Lukanda to Walamba section), was correct.

He further submitted that ZRL was undertaking the ZRL Modernisation Project, which would address the poor state of the infrastructure.

iii.
iii.

Rotten Hard Wood Sleepers The Controlling Officer submitted that the observation by the Auditor General that slippers had not been replaced in thirty-five years, was correct.

ZRL was undertaking the ZRL Modernisation Project, which would address the poor state of the infrastructure.

Committee’s Observations and Recommendations The Committee notes the response and resolves to await a progress report on the matters.

iv.
iv.

Cracked Wing Walls The Controlling Officer submitted that the observation by the Auditor General, with respect to the cracked culverts wing walls, which cracked in 2019 and had not been replaced, was correct.

ZRL currently undertaking the ZRL Modernisation Project which would address the poor state of the infrastructure.

Committee’s Observations and Recommendations Committee notes the response and resolves to await a progress report on the matter.
23.5 Procurement Matters 23.5.1 Contract for Supply of Ballast – Buk Truck Parts Limited K 60,567,428 On 18th October, 2013, Zambia Railways Limited engaged BUK Truck Parts Limited for the supply of stacking and loading of 310,000m3 of 50mm ballast stone for the track rehabilitation project at a contract sum of K60,567,428 with a duration of nine (9) months.

The following were observed.


i. Unsupplied Ballast The Controlling Officer submitted that the observation by the Auditor General with respect to undelivered ballast by BUK Truck Parts Limited valued at K 12,204,923, was correct.

The Committee learnt that in September 2021, the ballast which was stacked at Senkobo and Nega Nega valued at K445,078.67, was delivered to ZRL.

The undelivered value of ballast after the September 2021 delivery, stood at K11,759,215.60.
The matter was in court where ZRL was pursuing the recovery of the amounts for the undelivered ballast.

179 Committee’s Observations and Recommendations The Committee observers, with concern, that the contracts signed between ZRL and BUK Truck Parts Limited, have always been marred with challenges, as evidenced in other Reports of the Auditor General.
While noting that the matter is in court, the Committee urges the Controlling Officer, that going forward, ZRL should reconsider not engaging BUK Truck Parts Limited for any supply of equipment.

The Committee will await a progress report on the undelivered goods.

ii.

Failure to Recover Funds K 12,113,486 The Controlling Officer submitted that the observation was noted and agreed to.
He further submitted that that in order to recover amounts guaranteed, ZRL sought legal action on 11th February, 2016 against the guarantor, African Grey Insurance Limited and the supplier BUK for the recovery of the advance payment made, less what had been delivered.

The matter was in court where ZRL was pursuing the recovery of the amounts for the undelivered ballast.
Committee’s Observations and Recommendations The Committee reiterates it recommendation on the dealings between ZRL and BUK Truck Parts Limited.

The Committee will await a progress report on the matter.

23.5.2 Delayed Supply of Contract Deliverables – SMH Rail SND.

BHD The Controlling Officer informed the Committee that the observation by the Auditor General with respect to the challenges with the contract sum of US$24,800,000 between ZRL and SMH Rail SND.

BHD of Malaysia, was correct.


The Committee learnt that ten re-manufactured locomotives were to be delivered and that at the time of reporting, only four had been delivered.

The Committee also heard that the contract for the re-manufacture of the remaining six locomotives, which expired in February, 2017, had not been extended, as of 31st August, 2021.

The Committee also learnt that four remanufactured locomotives had not performed according to the contractual expectations and specifications.
Therefore, ZRL Management did not wish to proceed with the remaining six locomotives.

The supplier had since been communicated to, over their failure to meet the contractual specifications and ZRL‟s intention of not proceeding with remaining six locomotives.

Committee’s Observations and Recommendations The Committee observes, with concern the turn of events, with respect to the supply of the remanufactured locomotives.
The Committee observes that dis-continuing of the contract may have cost implication on ZRL.

In this regard, the Committee urges the Controlling Officer to submit a progress report to the Auditor General, and the Attorney General for counsel.

The Committee will wait an update.


180 23.6 Administrative Issues 23.6.1 Failure to Maintain Assets The Controlling Officer informed the Committee that the observation by the Auditor General, that cost of repairs and maintenance of locomotives and wagons, had increased by 142 per cent from 2018 to 2020 was correct.

ZRL had not replaced its rolling stock since 1976 due to insufficient revenue generation and lack of capital.

The assets had outlived their economic useful life of twenty years.
The Committee learnt that ZRL relied on Transnet Freight Rail (TFR) of South Africa and the wagons for TFR contributed 40 per cent to the revenues earned by ZRL.

The project to recapitalise ZRL would inject about 1,500 new wagons which would traverse on foreign lines and thereby reduce the interchange costs, as ZRL would reduce dependence on foreign owned locomotives as the case was as the time of reporting.
Committee’s Observations and Recommendations The Committee resolves to await a progress report on the matter.

23.6.2 Management of Properties Zambia Railways Limited owned properties located from Livingstone Victoria Falls Bridge to Misundu Border with the Democratic Republic of Congo (DRC), and in Mufulira and Luanshya.
The properties included the main railway strip reserves, station reserves and isolated ones such as the former Senior Management Guest House, Avon Guest House and Kabwe Warriors Complex located in Livingstone, Lusaka and Kabwe respectively.

Upon a review of the ZRL Estates Register, the following were observed.

i.
i.

Failure to Change Ownership K 118,979,900 The Controlling Officer submitted that the observation by the Auditor General that ZRL had A 101 properties valued at K118,979,900 and located in several towns, not transferred from Rhodesia Railways Limited, a company incorporated in England, was true.
He further submitted that Management had submitted a list of properties to the Chief Registrar at Ministry of Lands to ensure that all title deeds under Rhodesia Railways Limited were converted to Zambia Railways Limited.

ZRL intended to proceed through a phased approached and targets to conclude the exercise by December, 2023.

The Controlling Officer submitted that this arose as ZRL did not have a dedicated estate officer in the past, but an officer has since been employed.
181 Committee’s Observations and Recommendations The Committee is appalled that ZRL has been operating without transfer of ownership, for over, 101 properties.

The Committee is disappointed, as this can easily lead to loss of property.

The Committee will await a progress report on the matter.

ii.
ii.

Failure to Secure Title Deeds The Controlling Officer submitted that the observation by the Auditor General, ZRL had not secured title deeds for fifty-two parcels of land, some of which had buildings located on them was correct.

The Committee learnt that the value of these properties located in several towns was not availed for audit.
The Controlling Officer submitted that the fifty-two un-surveyed parcels of land in Chambishi, Chingola and Chililabombwe station reserves, were surveyed for purposes of obtaining title deeds.

Due to budget constraints, ZRL intended to proceed through a phased approach and targeted to conclude the exercise by December, 2023.

Management would conduct a property valuation in the second quarter of 2022 to ascertain the value of fifty-two parcels of land.
Committee’s Observations and Recommendations The Committee condemns the lethargic approach Management has attached to the management of its properties.

The Committee recommends that disciplinary action should be instituted against officers who are failing to execute their responsibilities.

The Committee will await an update on the matter.

iii.
iii.

Missing Title Deeds The Controlling Officer submitted that the observation by the Auditor General with respect to title deeds for two (2) properties located at Chibwe in Kabwe District, which were not availed for audit, as at 31st August, 2021 was noted.

The Committee learnt that the two parcels of land namely: F1287 and F1288 at Chibwe Siding in Kabwe Central Province were located within the protected forest reserve Lot No.

61.
61.

The certificates of titles of the two parcels of land were surrendered to the Commissioner of Lands in the year 1973 and this land was no longer property of ZRL.

Letter of surrender was available for verification.

182 Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification and if there are no further irregularities on the query, the matter should be closed.

iv.
iv.

Irregular Subdivision and Sale of Properties The Controlling Officer submitted that the observation of the Auditor General was noted and acknowledged.

He further submitted that the sale of eleven cited properties took place between 1998 and 2000 after the Board at the time resolved to sale.

The matter was reported to the Anti- Corruption Commission, the Company Secretary, at the time, was prosecuted and later acquitted.

The Committee learnt that the matter was still with law enforcement agencies.
Subsequently, the Board in 2010, imposed a ban on the sale of ZRL land.

However, Farm F1527 and Stand 8018 were not sold.

Committee’s Observations and Recommendations The Committee notes, with extreme disappointment, how a Board of Directors resolved to sale property which they were entrusted to protect and take care of.
The Committee strongly urges the Auditor General to undertake a forensic audit to ascertain the culprits in question and for the Secretary to the Treasury to take keen interest in the matter.

The Committee will await an update on the matter and keep it in view during future audits.
v. Encroachment of ZRL Land The Controlling Officer submitted that the observation by the Auditor General that thirty-one properties belonging to ZRL in several locations had been encroached by either squatters or Zambia Railways Limited ex-employees, was correct.

The Committee learnt that, as at 31st August, 2021, the squatters had not been evicted.
The Controlling Officer apprised the Committee that ZRL published a demolition notice alert in September, 2021 to all illegal developers and encroachers on ZRL land in the print media.

As at the time of reporting, Management had successfully carried out the demolition of some illegal structures that had been built by squatters on Farm 1261 at Ngwerere siding in Lusaka on 12th August, 2020.
The Committee also heard that some encroachers had taken the matter to court and that as soon as judgement was passed, ZRL would swing into action.

Additionally, Management had continued to pursue best use of vacant land to avoid further encroachments.

Committee’s Observations and Recommendations The Committee observes, with concern, the propensity by individuals to encroach on institutional land which is on title, contrary to the Lands Act No.

29 of 1995.
29 of 1995.

The Committee, therefore, 183 recommends that as a matter of urgency, stiffer punishment should be instituted for anyone flouting the law.

The Committee resolves to await an update on the issues before the court.
23.7 Staff Related Matters 23.7.1 Non-Remittance of Statutory Contributions K336,855,464 The Controlling Officer submitted that the observation by the Auditor General that ZRL owed National Pensions Scheme Authority (NAPSA) and Zambia Revenue Authority (ZRA) amounts totalling K336,855,464 in respect of pension contributions and Pay as You Earn (PAYE) as at 31st December, 2020, was correct.

The Committee learnt that as at 31st August, 2021, unremitted contributions increased to K348,131,120.
The Controlling Officer informed the Committee that Management had gone into payment plans with NAPSA and ZRA.

ZRL owed NAPSA a total of K31.69 million in contributions and had since settled the outstanding in June, 2021.

As at the time of reporting, ZRL was up to date with contributions to NAPSA.
Furthermore, Management had also a „time to pay‟ agreement with ZRA to pay K1 million per month for Income tax, Value Added Tax, PAYE, With Holding Tax and Excise tax of the K 130 million wed. Committee’s Observations and Recommendations The Committee notes, with concern, that the Time-To-Pay between ZRL and ZRA will take over 130 months.
The Committee finds the Time-To-Pay to lack of consideration of the time value of money and recommends that going forward, the entities must formulate realistic Time To Pay plans.

The Committee will await an update on the matter.

23.7.2 Failure to Remit Staff Pension Contribution K 22,849,181 The Controlling Officer submitted that the observation by the Auditor General with regard to failure to remit deducted contributions from employee salaries, was true.
The Committee learnt that some of the unremitted contributions had been outstanding as far back as 2017 and noted that, as at 31st August, 2021, unremitted contributions decreased to K21,229,449.

The Controlling Officer informed the Committee that ZRL had agreed on payment plan with the ZRL Pension Scheme to liquidate the outstanding amount.
Committee’s Observations and Recommendations The Committee is disappointed to note that the same query was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies for the Financial Year Ended 31st December, 2017.

The Committee is appalled that, in as much as ZRL deducted the contributions from the 184 employee‟s salaries, the contributions were not remitted.

The Committee recommends that disciplinary action should be instituted against all officers who occasioned the query.
The Committee will wait an update on the matter.

23.7.3 Irregular Payment of Productivity Incentive Allowance K1,741,240 The Controlling Officer submitted that the observation by the Auditor General with regard to payment of Productivity Incentive Allowance, when the budgeted haulage/ tonnage was not met, was noted and acknowledged.
The Committee learnt that apart from payment of the Productivity Incentive Allowance to unionised employees in amounts totalling K593,000 in 2018, even though the Company did not meet the budgeted tonnage, ZRL also paid out K522,940 to ZRL employees in Management salary grade who were not entitled.

The Controlling Officer further submitted that the Productivity Incentive Allowance was in the collective agreement.
Management was in negotiations with the union to amend the agreement and replace it with the Performance Management and Appraisal System as directed by the IDC and approved by the Board in June 2021.

The appraisal system would be implemented in 2022.


Committee’s Observations and Recommendations The Committee is extremely appalled to note that the same query was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2017 and that the Committee recommended that disciplinary action be instituted against the officers responsible for the payment, which the targets had not been reached.
The Committee notes that its recommendation was ignored on purpose as the same query was again cited and Management gave the same reasons.

The Committee strongly urges the Secretary to the Treasury to ensure that disciplinary action is instituted against all officers responsible and all the funds reimbursed promptly without further delay.

The Committee will await a progress report on the matter.
23.7.4 Unauthorised increase of Salaries and Allowances The Controlling Officer submitted that the observation by the Auditor with regard to an increment in salaries by the Board without obtaining written approval from the Minister of the then Minister of Transport, was noted and acknowledged.

He further submitted that the salary increments were approved the Board.
It was recognised that section 102 of the Railway Act, Chapter 454 of the Laws of Zambia, created a contradiction in terms of the approval authority required under the Railways Act as well as under Companies Act No.

10 of 2017.

Under the current law, the Companies Act took precedence and had vested the authority to determine conditions of service in the Board of Directors.

The Attorney General would be engaged to give guidance on this matter.
185 Committee’s Observations and Recommendations The Committee observes with extreme concern the lack of seriousness on the part of both the IDC and ZRL Management to ensure that the misnomer between section 102 of the Railway Act, Chapter 454 of the Laws of Zambia and Companies Act No.

10 of 2017, is normalised expeditiously, considering that the same query was cited in the Report of the Auditor General for the Financial Year Ended 31st December, 2017.
The Committee, had recommended that ZRL should engage Government so as to sort out the contradiction that existed between the Railways Act and the Companies Act, but no action had since been taken.

The Committee is of the view that this was deliberately not done.

The Committee urges the Secretary to the Treasury to intervene in the matter and institute disciplinary action against all the staff both at IDC and ZRL who occasioned the query.

The Committee will await an update on the matter.


24.0 ZISC GENERAL INSURANCE LIMITED: INDUSTRIAL DEVELOPMENT CORPORATION A review of accounting and other records for the Financial Years Ended 31st December, 2018, 2019 and 2020 conducted at the ZISC General Insurance Limited (ZSIC–GI) Headquarters and selected stations revealed the various irregularities to which the Controlling Officer submitted as outlined below.
24.1 Management-Irregular Clause on the Calculation of Gratuity The Acting Group Chief Executive Officer (AGCEO), who was the Controlling Officer for the Industrial Development Corporation, submitted that the observation by the Auditor General regarding the calculation of gratuity based on gross pay and that it would consequently lead to a loss of funds amounting to K 2,100,420, was correct and regrettable.
He further submitted that reference to gross pay was an error and the affected contracts had since been aligned to the Employment Code Act No.

3 of 2019.

Gratuity for the affected employees had been paid based on basic pay and the potential loss had been mitigated.
The Committee learnt that Management had its contract templates reviewed by the Ministry of Labour and Social Services and that the contracts for the top three officers in Management were reviewed by the Industrial Development Corporation (IDC), while for the officers not in Management, there contracts were reviewed by the Legal Department.
Committee’s Observations and Recommendations The Committee observes that in as much as the loss of K 2,100,420 did not occur, the Committee notes with concern that the lapse could have led to loss of funds.

The Committee finds it unacceptable that contracts that had been reviewed both by IDC and ZISC GI Legal Department could still have an error.
The Committee recommends that disciplinary action should be meted out against the officers responsible, both at IDC and ZSIC GL for failure to take due care when processing the contracts.

The Committee further recommends that IDC should ensure that all its contracts are reviewed by the Ministry of Labour and Social Services as opposed to only sharing a template with the Ministry.

The Committee will await a progress report on the matter.
186 24.2 Budget and Income The AGCEO submitted that the observation by the Auditor General that during the period under review, ZISC GI limited realised a positive variance of K 50,080,758 against its budget of K He further submitted that in 2018 and 2019, the 805,062,242 in 2020, was true.

underperformance in 2018 and 2019, was attributed to low business.
The Company had since improved marketing activities which resulted in the on-boarding of greenfield accounts with positive budget performance recorded in 2020 and 2021.

Committee’s Observations and Recommendations The Committee observes, with concern, the negative variances on its budget for 2018 and 2019.

The Committee urges that all documents in support of the submission be availed to the Auditor General for verification.
The Committee will await a progress report on the performance of the Greenfield accounts.
24.3 Weaknesses in Management of Information and Communication Technology System-Info ins Application System Management 24.3.1 Failure to Run Full Set of Financial Statements The Controlling Officer submitted that the observation by the Auditor General that the finance module developed by Informatics International Limited of Sri Lanka, at a contract sum of US$1,154,28, during the period under review did not perform assets management function, was correct.
He further submitted that the Info ins Application System Management System had since the audit been reconfigured to run a full set of financial statements and was fully operational.

The Committee learnt that some of the gaps in the system arose due to poor scoping of the business case.

Consequently, there were some add-ons on which ZSIC-GI limited incurred minimal costs while for the fixes there were no costs incurred.
Committee’s Observations and Recommendations The Committee finds it extraordinary that a similar query on the administration of the Infoins Insurance System Contract-US$ 1,154,288, was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2017.
The Committee is perturbed to note that the query was not satisfactorily resolved, which is a sign of failure to manage the entity with the seriousness it deserves.

The Committee urges the Secretary to the Treasury to invoke section 52 of the Public Finance Management Act No.

1 of 2018.

The Committee will await a progress report and will keep the matter in view for future audits.
187 24.3.2 Failure to Produce Payable Age Analysis The Controlling Officer submitted that the audit finding was acknowledged and noted.

The Info ins Application System was being put to effective use and subsequently, the Payable Age Analysis Report Module was reconfigured and was working according to expectations.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed.

24.3.3 Misconfigured Parameters of Unearned Premium Reserves (UPR) calculation The Controlling Officer submitted that the observations by the Auditor General had been noted.

There were two common methods of computing Unearned Premium Reserves (UPR).
These were the ‘24th Method‟ and the ‘365 days method.’ The Pensions and Insurance Authority (PIA), had authorised ZSIC GI to use the 365 days method and this UPR functionality in the system was operational.

The letter of approval was available for review by the Auditors.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which if there are no irregularities, the matter should be closed.
24.3.4 Questionable Data Integrity The Controlling Officer submitted that the observation by the Auditor General that during the period under review the age analysis of receivables and payables from Info Ins System revealed that some clients had negative balances in receivables and positive balances and in payables rendering data integrity questionable, was correct.

He further submitted that reconciliations had since been done and the identified anomalies had been corrected.
The current system (Infoins) had sufficient controls to prevent reoccurrence of this matter.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed.
188 24.4 Financial Analysis 24.4.1 Statements of Comprehensive Income The Controlling Officer submitted that the observation by the Auditor General that the company made profits of K6,200,000 and K45,300,000 in 2018 and 2020, respectively while in 2019, a loss of K4,151,000 was recorded, was correct.

He further submitted that the profits were mainly attributed to an increase in gross written premium of 46 per cent from K254,707,000 in 2019, to K372, 919,000, in 2020.
Committee’s Observations and Recommendations The Committee is elated to note that ZSIC GI recorded a profit in 2018 and 2019 and urges the Controlling Officer to ensure that the strategies being implemented are enhanced for the company to take its right position in the industry, considering that it is one of the oldest insurance companies in the country.

The Committee resolves to close the matter but keep it in view for future audits.
24.4.2 Statement of Financial Position as at 31st December, 2018, 2019 and 2020 An analysis of the Statement of Financial position as at 31st December, 2018, 2019 and 2020, revealed a number of irregularities as outlined below.

i.

Liquidity a) Working capital The Controlling Officer submitted that the observation by the Auditor General that ZISC-GI operated with a negative working capital consecutively, for the three years under review, was correct.
The Committee learnt that Management had projected a positive working capital of K116.5 million for the financial year ended 31st December, 2021.

Going forward, Management would enhance cost containment measures and improve its marketing efforts in a bid to increase its asset base.

The Committee also learnt that in 2021, the IDC recapitalised the entity to a tune of K 43 million and that the Government had liquidated its debt owed to the Company to a tune of K 33.8 million.
Further, the company had diversified its investment portfolio by reducing its dependence on Government business to 30 to 40 per cent.

To contain its costs, Management was working on reducing its head count which stood at 220, while that of its competitors was at 100 plus employees.
189 Committee’s Observations and Recommendations The Committee is concerned to note that the Entity envisaged improving its working capital mainly on the recapitalisation from the parent company, as opposed to improvements in the business operations.

The Committee recommends that Management should formulate strategies that ensure that the Company does not continuously depend on support from the parent Company.
The Committee urges the Secretary to the Treasury to intervene on the matter to pay off separation packages in a bid to reduce the head count to enable the Company compete favourably in the market.

The Committee will await a progress report on the matter.
b) Current Ratio The Controlling Officer submitted that the observation by the Auditor General that during the period under review, ZSIC-GI had a current ratio of 0.56 to 1, 0.63 to 1 and 0.96 to 1 for the period 2018, 2019 and 2020, which was below the standard of 2:1,was correct.

He further submitted that the Company had been recapitalised by IDC, therefore, Management of ZSIC GI projected a current ratio of 1.3:1 for the financial year ended 31st December, 2021.
Going forward, Management would enhance cost containment measures and improve its marketing efforts in a bid to increase its asset base.

Recapitalisation would also be pursued to address legacy liabilities.

Committee’s Observations and Recommendations The Committee does not accept the strategy of relying on recapitalisation as a means of clearing legacy debts.
The Committee directs that the Secretary to the Treasury must intervene in the matter to find a permanent solution to the legacy liabilities, which are mainly statutory obligations, with an option of writing off the debt to help clean the balance sheet.

The Committee will await a progress report on the matter.

ii.
ii.

The Solvency Margin The Controlling Officer submitted that the observation by the Auditor General that during the period under review, ZSIC-GI‟s Solvency Margin was below the sector benchmark of 10 per cent in accordance with the then, section 36(2) of the Insurance Act of 1997 was correct.

The Committee learnt that the Company recorded solvency margins of negative 79 per cent, 56 per cent and 12 per cent in 2018, 2019 and 2020.
The Controlling Officer submitted that the solvency margin was compliant at 10.13 per cent, as at the time of reporting, following capital injection of K43 million from IDC and the receipt of outstanding premiums of K33.8 million from Government.
Going forward, the Solvency Margin would be maintained and improved upon by various Management interventions such as early commencement of Government debt verification, right-sizing, compliance to various Time to Pay Agreements, new business acquisitions, improved retentions and engagement of the shareholder on modalities of a debt swap involving taxes.
190 The Committee learnt that any debt which was paid beyond sixty days allowed by the national credit policy did not qualify to be used to calculate Solvency Margin, hence the K 33.8 million did not have an effect on it, unless the capital injection.

The Committee also learnt that the Government always delayed to clear its premiums, but in instances where verification of the owed premiums was done in time and payments done within sixty days, such amounts would be used to calculate the Solvency Margin.
Committee’s Observations and Recommendations The Committee observes, with concern, that ZSIC-GI has been grappling with a low Solvency Margin, which is a critical parameter in ensuring that the Company is a going concern.

The Committee observes that a similar query was raised in the Report of the Auditor General for the Financial Year Ended 31st December, 2017.

The Committee recommends that Management should ensure that it adheres to the provisions of section 65 of the Insurance Act No.

38 of 2021.
38 of 2021.

The Committee will keep the matter open and in view of future audits.

iii.

Receivables Collection Period The Controlling Officer submitted that the observation by the Auditor General that during the period under review, ZSIC-GI was not efficient in collecting its debts in that the receivable days ranged from 168 to 239, which was in excess of the credit period of sixty days, was correct.
He further submitted that a significant portion of the receivables was Government debt, which in most cases took more than 365 days to collect.

To ensure Government was paying its premiums quicker, Management would ensure that payment plans were agreed, signed and followed through.

Further, as per policy, Management would not pay claims where premium was outstanding.
He further submitted that this scenario related to clients with whom payment plans had been agreed upon with regard to payment of premiums, and in instances were a calamity fell and a client sought for claims while not having completed the payments as per the payment plan.
Committee’s Observations and Recommendations The Committee observes, with concern, the reappearance of the same queried which was cited in the Report of the Auditor General for the year ended 2017 and that at the time, Government owed a larger portion of the debt.

The Committee directs the Secretary to the Treasury to ensure that all State-owned enterprises doing business with the Government are paid for the service rendered, in order for the entities to operate profitably as full-fledged businesses.
The Committee will await an update on the matter.

24.5 Operational Matters 24.5.1 Failure to Remit Insurance Levies The Controlling Officer submitted that it was regrettable that ZSIC GI, owed Pensions and Insurance Authority (PIA), an insurance levy amounting to K3,572,454.

He further submitted that the Company had a Time to Pay Agreement with the PIA of K350, 000 per month.

The 191 Company had at the time of reporting, remitted the sum of K3.

8 million to PIA Levy in 2021.


Documentary evidence was available for verification.

The Committee learnt that the levies paid to PIA were a portion of the premiums, and going forward, Management was adhering to payment plans signed with PIA and was also ensuring that all the premiums were paid on time.

However, for clients who were not adhering to payment of premiums on time, such contracts were being terminated to avert accumulation of debt with PIA.
Committee’s Observations and Recommendations The Committee notes the measures that have been put in place.

However, the Committee is disappointed to note that the same query was cited in the Report of the Auditor General for the Financial Year Ended 31st December, 2017 and that the Committee had recommend that measures should be put in place for the query not to recur.
The Committee recommends that the Secretary to the Treasury should invoke the provisions of section 52 of the Public Finance Management Act No.1 of 2018.

The Committee will await a progress report on the matter.

24.5.2 Failure to Collect Premiums and Claims from Reinsurance K337,973,241 The Controlling Officer submitted that the observation by the Auditor General regarding the failure to collect premiums timely was correct.
He further submitted that out of the total uncollected premiums, K160 million was pending write-off.

He further apprised the Committee that premiums became ineffective if they were not paid within sixty days.

The authorisation process for write-off involved both Management and the Board.

At the time of the audit, the process for writing off expired and uncollectable premiums had not been completed.
However, out of the K337.9 million outstanding premiums, as at 30th September, 2021, approximately K70 million had been collected in the period October to December, 2021.

The Committee learnt that efforts to collect the balance were on-going through various interventions, one of which was the 2021 Government Debt verification exercise.
Going forward, Management would enhance the utilisation of payment plans, digital premium collection methods such as Direct Debit Credit Clearing (DDAC), as well as cancellation of cover for defaulting clients.

The Controlling Officer further submitted that the larger portion of the K160 million was legacy premiums which were uncollectable.

Committee’s Observations and Recommendations The Committee observes, with concern, the uncollected premiums were deemed uncollectable.
The Committee notes that the clearing of K160 million, will lead to revenue loss.

The Committee further observes that measures put in place to avert non-collection of premiums are more or less reactive as opposed to proactive.

The Committee directs the Controlling Officer to ensure that proper collection measures are put in place to ensure that the query does not recur.

The Committee will await an update on the matter.

192 24.5.3 Management of Salvages i.


Disposal of Salvage Motor Vehicle – Sportero ABV 8045 - Choma The Controlling Officer submitted that the observation by the Auditor General that there was no assessment report for the salvage vehicle which was offered for sale at K9,000 and payments made on 12th June, 2018, was true.

He further submitted that the salvage vehicle was bought by Management and that it was regrettable that the set-out procedure was not adhered to.
The Controlling Officer apprised the Committee that for operational, reputational and administrative convenience, the practice to purchase salvage vehicles by the Company had since been discouraged, even though the procurement procedures where salient and did not prohibit Management from buying.
Committee’s Observations and Recommendations The Committee observes that in as much as the procurement procedures do not prohibit Management from purchasing salvages from its use, it is unacceptable that the set-out procedure was not followed and, in that regard, recommends that disciplinary action should be meted out against the officers who failed to execute their duty correctly.

The Committee further urges that a policy to prohibit Management from purchasing the salvage vehicles must be put in place.
The Committee will await an update on the matter.

ii.

Unaccounted for Salvage – GRZ 138 CH - HQ The Controlling Officer submitted that the observation by the Auditor General was noted and acknowledged.

He further informed the Committee that it was unfortunate that the broker earlier took possession of GRZ 138 CH, without following the procedure of salvages.
The Committee learnt that after the vehicle was put up for auction, a bidder paid K 31,500 as the highest bidder but could not get the vehicle as it was wrongly in possession of the broker.

The Committee learnt that the broker had since paid the amount in question, which ZSIC -GI had earlier refunded the bidder.

Committee’s Observations and Recommendations The Committee notes with worry, the manner in which the broker handled the disposal of GRZ 138 CH.
The Committee directs the Controlling Officer to ensure that stringent control systems are put in place to avert such lapses.

The Committee further directs that all documents in question should be submitted to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed.

iii.

Failure to Write off Salvages from the Books of the Company The Controlling Officer submitted that the observation by the Auditor General was noted and acknowledged.
He further submitted that the query arose because the salvage policy which was in force during the period under review, had lacunas which made it difficult for Management to 193 ascertain the value of the salvage vehicles and what to do with assets that were not bought after the prescribed period in which to dispose the same.
The Committee learnt that the salvage policy had since been reviewed and that Management was in the process of ascertaining the value of the salvage vehicles and that the revised policy allowed Management to review the disposal of salvages every six months.

Committee’s Observations and Recommendations The Committee resolves to close the matter but keep it in view for future audits.
24.6 Procurement Matters-Contract for supply and delivery of Motor Cover Notes An analysis of a contract for the supply and delivery of motor cover notes, non-motor cover notes and four-part receipts, at a total contract sum of US$191,450 with Rank Industries Limited revealed irregularities, as set out below.
24.6.1 Failure to Include Interest Rate The Controlling submitted that the observation by the Auditor General that the contract signed between ZSIC-GI and Rank Industries Limited, had a clause wherein the purchaser was expected to pay the supplier interest on any delayed amounts due to the supplier and that the rate of interest was not stated was true and regrettable.

The Controlling Officer submitted that in order to lower costs, Management negotiated interest rate of 2.5 per cent.
Further, to avoid similar future occurrences, Management would endeavour to comply with agreed payment plans.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission for verification, upon which if there are no irregularities, the matter should be closed.

24.6.2 Payment of Interest K 115,630 The Controlling Officer submitted that the observation of the Auditor General was noted and acknowledged.
He further submitted that the applicable interest rate that the supplier had indicated in their financial proposal, was bank interest rates on all payments beyond sixty days.

However, the Management of ZSIC GI negotiated with the supplier for a lower rate of interest of 2.5 per cent, which had since been paid.
Committee’s Observations and Recommendations The Committee observes, with disappointment, the payment of the supplier at a higher rate because the contract did not specify the rate at which was to be charged for any delayed payments.

The Committee finds it unacceptable that there was such a lapse at the point of 194 formulating the contract which consequently cost the Company.

The Committee directs that disciplinary action should be instituted against all officers responsible for the lapse.
The Committee will await an update on the matter.

24.7 Administrative Issues - Failure to Collect Outstanding Rental Income K2, 731,242 The Controlling Officer submitted that the observation by the Auditor General that ZSIC GI failed to collect rentals to a tune of K 2,731,242 was correct.

He further submitted that following a reconciliation, the outstanding balance was K570,000 and not K 2,731,242.
Going forward, the Company would ensure strict adherence to tenancy agreements and to consistently collecting three months advance payments.
The Controlling Officer apprised the Committee that a larger portion of K570,000 was owed by the Road Transport and Safety Agency, which was unable to pay its rentals three months in advance but always paid its rent after it received funding Committee’s Observations and Recommendations The Committee directs the Controlling Officer to avail all documents in support of the submission to the Auditor General for verification and the Committee will await a progress report on the matter 24.8 Asset Management - Failure to Submit an Asset Disposal Report to the Secretary to the Treasury K 343,000 The Controlling Officer submitted that the observation by the Auditor General was noted and acknowledged.
The Controlling Officer further submitted that Management had since written to Secretary to the Treasury to submit the disposal of assets report.

Documentary evidence was available for verification.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission be submitted to the Auditor General for verification.

The Committee will await an update on the matter.


24.9 Staff Related Matters 24.8.1 Failure to Pay Outstanding Statutory Obligations K 151,069,282 The Controlling Officer submitted that the observation by the Auditor General that ZSIC-GI owed National Pension Scheme Authority (NAPSA- K21,015,687) and Zambia Revenue Authority (ZRA-K130,053,595), in respect of pension contributions, Insurance Premium Levy, VAT, Income Tax, Withholding Tax and PAYE, was true.
The Controlling Officer apprised the Committee that the Company has signed Time to Pay Agreements with ZRA and NAPSA for K650,000 and K300,000, respectively every month.

The Company had not been working at optimum staff levels and had embarked on a staff right-sizing program.

Significant efforts to pay statutory obligations were continually being made.

In 2021, 195 K21.8 Million was paid towards various taxes.
He further submitted that in 2021, a total of K7.2 Million was paid to NAPSA, K 4.2 Million towards the current obligations and K3 Million on legacy penalties.

Committee’s Observations and Recommendations The Committee urges the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await a progress report on the matter.
24.8.2 Failure to Remit Staff Pension Contribution The Controlling Officer submitted that the observation by the Auditor General that ZSIC GI managed a Pension Trust Fund was correct.

He further submitted that it was regrettable that the Fund was in deficit of K38,200,000.

The Controlling Officer apprised the Committee that the Fund was using a Defined Benefit Scheme, which was difficult to manage as the payment of retirement benefits was calculated on the last salary for any member.
He further submitted that Management was negotiating with the Unions to change the scheme from Defined Benefit to Defined Contribution and also to reduce the contribution by the company from 20 per cent 5 per cent.

The Committee learnt that the ten members of staff who had retired had been paid all their dues and were no longer on the payroll.

The Company paid all outstanding contributions to the Scheme as at close of December, 2021.

The amount paid was K15.7m.


Committee’s Observations and Recommendations The Committee notes the response and urges the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee further recommends that Management should ensure that the pension reforms are beneficial both to the Company and to the employees.

The Committee will await a progress report on the matter.
25.0 ZSIC LIFE LIMITED INDUSTRIAL DEVELOPMENT CORPORATION A review of operations for the Financial Years Ended 31st December, 2018, 2019 and 2020 maintained at ZSIC Life Headquarters and provincial stations revealed various irregularities to which the Controlling Officer submitted at set out below.
25.1 Information and Communication Technology Systems 25.1.1 Loss of Critical Data The Acting Group Chief Executive Officer (AGCEO), who was the Controlling Officer for the Industrial Development Corporation, submitted that the observation by the Auditor General that during the period under review, ZSIC Life failed to maintain its accounting records in electronic form for a period of ten years, in accordance with section 17 (1) part (e) of the Public Finance 196 Management Regulations 2020 was correct.
The Committee learnt that ZSIC Life did not equally implement an Incident Management System to handle security incidents.

The Controlling Officer informed the Committee that the challenges with regard to management of its Information Communication Technology (ICT) systems, had been due to the type of Access Database which the Company had been using for five of its systems, which were: Enterprise Resource Platform (ERP); Exchange Server; Real Estate; Sun System and Payroll.
Management had commenced migration of the systems from Access Database to a web-based database two years before the attack.

The other systems had been migrated except, the payroll.

The Controlling Officer informed the Committee that the Company was rebuilding the data from the available records and was upgrading its payroll system from the Access Database to a web- based database.
The rebuilding of the data in the system and the commission of the new payroll system, would be completed at the end of March, 2022.

Additionally, the institution was adhering to the daily backup of all the Company systems.

Documentary evidence was available for verification.
Committee’s Observations and Recommendations The Committee observes, with concern, the failure by Management to avail the Auditors, the relevant documentary evidence, even though they had it in their possession during the time of the audit.

This action denied the Auditors a chance to conduct a verification exercise on the action taken on a number of queries, which would have led to the queries being dropped from the Report.
In this regard, the Committee directs the Controlling Officer and the Secretary to the Treasury to invoke section 82 (k) of the Public Finance Management Act No.

1 of 2018.

The Committee will await an update on the matter.


25.1.2 Holistic Insurance Platform ZSIC Life engaged Tucana Africa (PVT) Limited, of Mauritius to supply and deliver a fully customisable and centralised Holistic Insurance Platform for the National Health Insurance Scheme Project, at a contract price of USD7,000,000, with a project duration of five (5) years.

The following were observed in relation to this contract: i.
Failure to Secure Source Codes The Controlling Officer submitted that the observation by the Auditor General that the vendor retained full rights to the software, including the source code, was true.

The Committee learnt that the contract signed with the vendor had a clause which stated that the vendor could terminate the agreement for convenience and without cause at any time by giving the customer at least 180 days‟ notice.
In the event of termination for whatsoever reason, the customer should immediately, upon termination, return all copies of the software and its components whether or not a component had been customised for the customer‟s use.

The Controlling Officer apprised the Committee that it was generally accepted practice that source codes were best owned by the developers of the system since they had expertise for 197 developing the system which helped the users to benefit from upgrades and system enhancements.
He further submitted that purchasing a source code entailed the Company investing in a pool of highly specialised technical expertise to handle the system architecture and manage the system.

It was also very expensive to buy a system with its source code as it entailed taking the developer out of business with respect to that platform.
The Committee learnt that the cost of the Holistic Insurance Platform (HIP) source code would have been in excess of US$28million.As a result of the above, ZSIC Life Plc agreed with National Health Insurance Management Authority (NHIMA),to do away with the ownership of the source code at commencement of the project as it was not commercially viable.
The Committee heard that the risk that could lead to loss of the entire system to the vendor, was non-payment of fees for the system development and customisation.

However, the Company drew comfort in its ability to meet its financial obligations to service the contract and thus viewed the chances of terminating the contract as remote.

In addition, as a mitigation measure, in the event that the services were terminated, ZSIC Life Plc had implemented an active backup solution.
Committee’s Observations and Recommendations The Committee notes the response with reservation and urges the Auditor General to revalidate the submission with respect to having a vendor retaining the access codes.

The Committee observes that the contract indicated that ZISC Life would develop a tailor-made solution as opposed to the procurement of an off the shelf solution, which the Committee finds awkward.
In this regard, the Committee further urges the Auditor General to investigate the matter and in the event that ZISC Life acted to the contrary with respect to procurement of a tailor-made solution, disciplinary measures should be instituted for the anomaly as this would entail that funds were not spent on the correct product.

The Committee observes, with concern, that the contract permitted the vendor to terminate the contract without reason.
The Committee directs the Controlling Officer to ensure that Management amends this clause as it seems to only benefit the vendor and disadvantages them as the client.

The Committee will await a progress report on the issues.

ii.
ii.

Lack of Control Over Data Base The Controlling Officer submitted that the observation by the Auditor General that the Database Administration Support was performed by the vendor and that performing such functions by an entity outside Zambia could conflict with the provisions of section 14 of the Data Protection Act No.

3 of 2021, was noted.


He further submitted that the data was on a server within the Republic of Zambia and the vendor was only given access rights periodically for fine-tunes, updates and upgrades.

The vendor had controlled access to the Data Centre which was managed by an IT Manager for NHIMA.

The Committee learnt that the system was monitored locally and provided an audit trail for NHIMA to know who ever accessed the system.
This arrangement was only for the period while the system was under development.

Once the system was completed, the responsibility to manage the database would be transferred to ZSIC Life Plc, in the second quarter of 2022.

198 Committee’s Observations and Recommendations The Committee urges the Auditor General to conduct a verification of the submission, upon which if there are no irregularities, the matter should be closed.
25.1.3 Payment of Claims without Supporting Premiums K 4,031,621.76 The Controlling Officer submitted that the observation by the Auditor General that a comparison between claims paid against premiums paid on the Zamsure ERP, revealed that 823 payments amounting to K4,031,621.76,in respect of 580 policies, were not supported by premium payments on the system, was correct.
The Controlling Officer apprised the Committee that the payments in question mainly related to clients who paid premiums through the Payroll Management and Establishment Control (PMEC) and confirmation of premium status of individual policy accounts were then done manually using soft copies of the deduction schedules.

Accordingly, there was no loss of funds involved.


Following the development of the ERP, the data had since been migrated to the new system and effective January, 2021, all policies had individual premium payment accounts and statements.

The system was available for verification.


Committee’s Observations and Recommendations The Committee observes, with concern, Management‟s lackadaisical approach to granting the Auditors access to verify the system, which would have led to the query being dropped from the Report.

In this regard, the Committee directs the Controlling Officer and the Secretary to the Treasury to invoke section 82 (k) of the Public Finance Management Act No.

1 of 2018.

The Committee will await an update on the matter.


25.1.4 Payment with No Policy Number The Controlling Officer submitted that the observation by the Auditor General that sixty payments for claims amounting to K269,941.56, did not have policy numbers, making it impossible to ascertain whether or not these payments were backed by valid policies, was noted.

The Committee learnt that policy numbers were only allocated to policy holders.
However, in some cases, deductions had been made against non-policy holders due to errors, mainly arising from employee man numbers when preparing inputs for payroll deductions.

Where such errors occurred, the company reimbursed the non-policy holders without assigning them policy numbers.

To reduce and eventually eradicate such errors, it was a standard practice to confirm, through phone calls, the employee‟s man numbers with the clients before the inputs were submitted.
Additionally, Management was migrating from manual generation of payroll inputs to system generated ones to minimise human intervention at the time of submitting inputs to employers.

The status as at the time of reporting, was that 80 per cent of payroll inputs were system generated and electronically transmitted to the employers.

199 Committee’s Observations and Recommendations The Committee notes that payment of claims to non-existent policy holders would have led to loss of funds.
The Committee urges the Auditor General to conduct a verification of the system, upon which, if there are no irregularities, the matter should be closed but kept in view during future audits.

25.2 Budget and Income The Controlling Officer regretted that the query on the budget and income, was not responded to.

He further submitted that the omission was occasioned by the omission of the table on the budget and income, from the final copy that was sent to ZISC Life by the Office of the Auditor General.
The Controlling Officer submitted that the observation that Management failed to collect income in amounts totalling K54, 123,610 for the period under review, was correct.

The Committee learnt that during the period under review, ZSIC life had liquidity challenges and as a result Management was unable to service claims and consequently its claims ratios increased.
The Controlling Officer informed the Committee that this affected its ability to pay premiums and eventually market its products and reach its budget targets.

The Controlling Officer also submitted that some of the assumptions factored in at the budgeting stage did not hold up.

Committee’s Observations and Recommendations The Committee observes that failure to actualise budget targets inhibits execution of planned activities which has a negative impact on the achievement of the mandate of the Company.
The Committee urges the Controlling Officer to ensure that the Entity adheres to the provisions of section 20 (a) and (b) of the Public Management Act No.

1 of 2018, which provides for the need to ensure that revenue is properly forecast, considering other binding constraints within the macroeconomic framework.
25.3 Financial Analysis 25.3.1 Statement of Comprehensive Income An analysis of the Statement of Comprehensive Income for the financial year ended 31st December, 2018, 2019, and 2020 revealed the following: i.
Decrease in Net Premiums The Controlling Officer submitted that the observation by the Auditor General that the premium decrease in the period under review, was due to the withdraw of some legacy investment policies, which were eroding the value of the company but were very popular with the clients and contributed more than 30 per cent to the company‟s premium, was correct.

He further submitted that the introduction of the new revised policies that replaced the legacy ones took long to get traction.
He further submitted that the Company had, however, gone back to its 200 growth trajectory even after the withdrawal of the two products.

In 2021, a 15 per cent premium growth was recorded.

The Committee learnt that the newly introduced products were more profitable than the previous ones and that in as much as the products were popular, they contributed to the actuarial liabilities.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission be availed to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed.

ii.
ii.

Increase in Expense Ratio The Controlling Officer submitted that the observation by the Auditor General that during the period under review, the expense ratio increased from 108.62 per cent in 2018 to 239.08 per cent in 2020, which was astronomically above the industry average of 37.2 per cent, was correct.

The Controlling Officer submitted that, in computing the expense ratio for a diversified entity like ZSIC Life, all revenue streams had to be considered rather than only the premium income.
Therefore, the combined expense ratio for the period, was 97 per cent rather than the reported 239.08 per cent.

The comparative average ratio for the market, according to the PIA (2020 Annual Report) was 96 per cent.

At the end of 2021, the expense ratio had reduced to 83 per cent and Management would endeavour to bring this figure number further down.
Committee’s Observations and Recommendations The Committee observes, with concern the high Expense Ratio which entailed that the Company was spending more to increase its clientele than the premiums it was realising.

The Committee directs Management to submit the strategies it has earmarked to reduce the Expense Ration to an acceptable Industry average to the Office of the Auditor.

The Committee will await a progress report on the matter.

iii.
iii.

Increase in Claims/loss ratio The Controlling Officer submitted that the observation by the Auditor General that the claims /loss ratio for ZSIC Life, increased from 49.06 per cent in 2018 to 89.39 per cent in 2020 and that most claims were not being settled as they matured, was correct.

He further submitted that the other factor was the increase in legacy polices, which were popular and had reached maturity stage hence the raise in claims ratio.
To ensure timely payment of claims, Management had firstly put up strategies to mobilise more funds through increase, in rental collection and secondly Management had introduced new products whose maturity was five years.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the matter.

201 25.3.2 Statement of Financial Position i.


Deteriorating Current Ratio The Controlling Officer informed the Committee that the observation by the Auditor General, that the current ratio for ZSIC Life during the period under review ranged between 1.93:1 to 0.51:1, which was below the industry acceptable current ratios of 1.51 to 3:1, was correct.
The Controlling Officer further informed the Committee that the Company‟s liquidity position had improved significantly with the current ratio, as at 31st December, 2021, sitting at 1.3:1 from 0.58: 1, recorded as at the end of 2020. ii.

Poor Solvency Ratio The Controlling Officer submitted that the observation by the Auditor General regarding poor solvency ratio as indicated by both options, which were Regulatory Solvency, as calculated by Pension Insurance Authority and Actuarial Valuation, was correct.
He further submitted that the company‟s solvency position had been improved, with a capital injection of K80m in 2021, received from the IDC.

The solvency position, as at end of December, 2021, stood at 109 per cent.

To ensure solvency sustenance, the company‟s investment portfolio was being realigned.
Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification and the Committee will await an update on the matters.
25.4 Operational Matters 25.4.1 Failure to Satisfy Minimum Solvency Requirements The Controlling Officer submitted that the observation by the Auditor General with respect to failure to satisfy minimum solvency requirements and consequently not being granted a long- term insurance license until the company met the regulatory solvency requirements, was correct.
The Controlling Officer apprised the Committee that the Company had since managed to meet the Regulatory Solvency, as at 31st of December, 2021, with a solvency margin of 109 per cent, as confirmed by the Pensions and Insurance Authority.

This followed the capital injection by the IDC.

The solvency statement was available for verification.
Committee’s Observations and Recommendations The Committee observes, with concern, that ZSIC Life, which is a Government owned business was operating without a long-term insurance license.

The Committee notes the response and directs the Controlling Officer to submit all documents in support of the submission to the Auditor General for verification, upon which, if there are no irregularities, the matter should be closed.
202 25.4.2 Non- Compliance with the Premium Policy The Controlling Officer submitted that the observation by the Auditor General that Management spent a total of 86 per cent, 91 per cent and 23 per cent, respectively of the premium as management fees for the years 2018, 2019 and 2020, respectively, as opposed to investing the funds in line with, the Premium Policy, was noted.
The Committee learnt that ZSIC Life had an investment policy which guided its investment activities and how much of the premiums should be invested, although it was not availed to the Auditors during the audit exercise.

The Controlling Officer apprised the Committee that Management failed to invest, due to delays in PEMC deducting premiums which resulted into the Company not having liquidity to invest in line with the premium policy.
Committee’s Observations and Recommendations The Committee observes that in as much as ZSIC Life had an investment policy for its premiums, failure to invest may increase going concern problems for the Company, as assets will not match the claim liability.

This may result in ZSIC Life Plc failing to pay claims when they fall due.

The Committee directs the Controlling Officer to submit all documents in support of the submission.
The Committee finds it unacceptable that the investment policy was not availed to the Auditors during the audit exercise and therefore, recommends that disciplinary action should be instituted against the officers who failed to act appropriately.

The Committee will await an update on the matters.

25.4.3 Weaknesses in Investment Management i.


Poor Performance of Real Estate The Controlling Officer submitted that the observation by the Auditor General that most of the properties were unprofitable as the direct and indirect costs were higher than the rental income for the period under review, was correct.
The Committee learnt that some of the major property costs included water bills, security charges and electricity for common areas and Management had put in place a number of measures to address the property expenses and increase profitability, as set out below.

i) The water meter separation installation was completed at the Premium Plaza in Ndola, and this exercise had been extended to other properties in Ndola and Lusaka (Kopa Flats).
This had resulted in the reduction of water expenses by almost 50 per cent from K3,017,117.00 (2020) to K1,623,981 (2021).

ii) Service charges would be introduced for the leases commencing 2023, to help recover some of the costs incurred in the running of the properties.

203 iii) A Highest Best Use (HBU) study, was conducted in 2021, on the properties to inform the Company‟s strategy on enhancing real estate performance.

The recommendations from the report were being implemented.
Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit an update report on the performance of the Entity with regard to percentage of expenses in comparison to total income for the 2020 and 2021, following the implementation of the aforementioned measures.

The Committee will await an update on the matter.

ii.
ii.

Failure to Collect Rentals K 36,884,795.24 The Controlling Officer submitted that the observation by the Auditor General regarding uncollected rentals was correct and regrettable.

He further informed the Committee that Management had registered over 80 per cent efficiency rates.

The bulk of the uncollected rentals represented legacy debts from the pre-2015 period and this was demonstrated by the minimal movements on the year-on-year cumulative rental receivables.
ZSIC Life had taken stringent measures to enhance rental collection through the use of debt collectors, enhanced lease agreements and taking legal action against defaulting tenants.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit documents such as: schedule of legacy debt and evidence of litigation, lease agreements for new tenants and evidence of payments for rentals to the Office of the Auditor General for verification.
The Committee will await a progress report on the matter.

iii.

Unsigned Tenants Agreements The Controlling Officer submitted that the observation by the Auditor General that Management had 290 agreements unsigned, as at December, 2020, was correct and regrettable.

The Committee learnt that the majority of the unsigned leases were for tenants in Ndola occupying Premium Plaza, which had over 110 tenants.
This was because tenants were refusing to sign the leases on account of a major long outstanding court case on rental charges, whose Judgment was only passed in December, 2020, after dragging for more than five years.

The judgment was in favour of ZSIC Life Plc, and the Court was yet to determine the extent of the debt owed by the tenants.

The Premium Plaza unsigned leases accounted for approximately 50 per cent of the outstanding lease agreements.
Subsequent to the audit, by 31st December, 2021, 80 per cent of the company‟s tenants had signed leases.

The Committee learnt that the tenants had refused to sign the lease agreements because the Court had not determined the extent of the debt owed.

204 Committee’s Observation and Recommendations The Committee finds it unacceptable that ZSIC Life has 20 per cent of tenants who have not signed lease agreement even when the Judgment was in its favour.
The Committee directs the Controlling Officer to promptly intervene and ensure that the lease agreements in question are signed by requesting the Court to promptly determine the extent of the debt owed.

The Committee directs the Controlling Officer to submit a report on the management of the tenants with respect to those that have signed lease agreements, periods paid for, legacy issues and the tenants who have not signed the lease agreements and why.
The Committee will await a progress report on the matter.

iv.

Failure to Pay Claims K 89,299,000.00 The Controlling Officer submitted that the observation by the Auditor General regarding the increase in outstanding claims was correct.

The Committee learnt that the Company had been facing liquidity challenges from 2018, arising from the non-remittance of premiums.
Furthermore, the issue of outstanding claims was a legacy one, where the bulk of the company‟s investment portfolio was sitting in an illiquid asset class, creating an asset/liability mismatch.

This was because when the Company was formed in 2008, it was given the claims without the matching assets.

The Controlling Officer informed the Committee that the accumulation of claims was because of legacy policies that the company was selling.
The loss yielding policies had since been discontinued, removed from the market and were in a runoff phase with claims expected to taper off in 2024.

The policy liabilities were matched to illiquid assets making the company fail to fulfil the obligations as they fell due.

ZSIC Life Plc had put in place an initiative in which an allocation of K1.5 million per week was being paid towards the unbundling of the claims liability which stood at K63 million, as at the time of reporting.
The initiative would have to continue until sufficient liquidity was generated to discharge all the outstanding cases.

All new policies that had been developed and were in the market were matched to assets tenure, nature and value.

Committee’s Observations and Recommendations The Committee directs that all documents in support of the submission should be submitted to the Auditor General for verification.

The Committee will await an update on the clearing of the outstanding debt.
25.5 Failure to Remit Statutory Obligations The Controlling Officer submitted that the observation by the Auditor General that ZSIC Life failed to remit statutory obligations during the period under review, was correct.

He further submitted that ZSIC Plc was as of 31st December, 2021, current with all its statutory obligations.
The Committee learnt that during the period under review, ZSIC Life had forty-eight months 205 payment plan, entered with ZRA in September, 2021, which was fully complied with, as at the close of the year and had not been finalised.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all documents in support of the submission to the Auditor General, upon which, if there are no irregularities, the matter should be closed.

25.6 Asset Management i.


Loss of Revenue Vacant Properties K 7,827,252.80 The Controlling Officer submitted that the observation of the Auditor General regarding loss of revenue on vacant properties, was correct.

He further submitted that ZSIC Life Plc was in the process of undertaking renovation of the units to make them attractive for occupation.

The renovations were expected to be completed in the second quarter of 2022.
The Board further approved the disposal of some properties whose refurbishment cost was almost equivalent to the value of the property.

Committee’s Observations and Recommendations The Committee directs the Controlling Officer to submit all the documents in support of the submission to the Auditor General for verification.

The Committee will await an update on the matter.

ii.
ii.

Poor State of Infrastructure The Controlling Officer submitted that the observation by the Auditor General regarding the poor state of infrastructure, was correct.

He further submitted that ZSIC Life Plc, was in the process of mobilising resources to start the renovations of the Units in question.

The renovations were expected to be completed in the second quarter of 2022.
Kopa Flats had since been vacated and would be refurbished during the second quarter of 2022, while other properties with minor repairs would be renovated before the end of the second quarter of 2022.

Committee’s Observations and Recommendations The Committee will await a progress report on the renovations of the dilapidated infrastructure.
206 PART III REPORT ON THE VERIFICATION TOUR OF LUSAKA, CENTRAL AND COPPERBELT PROVINCES COMMITTEE ON PARASTATAL BODIES - LOCAL TOUR REPORT INTRODUCTION Pursuant to its Programme of Work, for the First Session of the Thirteenth National Assembly, the Committee undertook investigative and verification tours from 16th to 23rd May, 2022, to Lusaka, Central, and Copperbelt Provinces.
The tours were on selected parastatal bodies and other statutory institutions that were cited in the Reports of the Auditor General as listed below.

i.

Special Report of the Auditor General on the Accounts of Water and Sanitation Companies for the Financial Year Ended 31st December, 2018. ii.

Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2018, and iii.
Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2019.

A LUSAKA PROVINCE In Lusaka province, the Committee visited Lusaka Water Supply and Sanitation Company Limited; Ministry of Small and Medium Enterprises, with respect to the Citizens Economic Empowerment Commission; and the Ministry of Technology and Science, with respect to the National Institute for Scientific Research.

1.
1.

Lusaka Water Supply and Sanitation Company Limited The Committee toured four sites under the Lusaka Water Supply and Sanitation Company Limited and the major findings are listed below.

a.

Construction of sewer network extension along Kafue Road Arising from the tour of the sewer network situated along Kafue Road which was constructed under the Lusaka Water Sanitation Programme, the Committee highlights the major findings as set out below.
The Committee learnt that: i. the Lusaka Water and Sanitation Programme was financed by different cooperating partners to a tune of US$ 300 million.

The cooperating partners included the World Bank; the African Development Bank (AfDB); the German Development Bank, (KfW) and the European Investment Bank (EIB).

The financing which is outlined below also 207 included building capacity among staff of Lusaka Water and Sewerage Company, as set out below.
Financier World Bank IDA Total Amount USD 65,000,000.00 USD On-lent as Loan 38,000,000.00 Africa Development Bank USD 50,000,000.00 USD On-lent as Grant USD 27,000,000.00 - 50,000,000.00 European Investment Bank German Investment Bank Euro 102,500,000.00 Euro 20,500,000.00 Euro 82,000,000.00 Euro 33,000,000.00 Euro 33,000,000.00 - ii.
10,000 customers would be connected to the new sewer line after the project was completed and that the capacity of the sewer had factored in the population growth of Lusaka up to the year 2030, after which another feasibility study would be undertaken to revalidate the capacity of the network to handle the sewer connections; iii.

61 per cent of the residents of Lusaka, depended on ground water, hence the urgent need to protect ground water; iv.

v. vi.
v. vi.

the Lusaka Water Supply and Sanitation Company Limited (LWSC) was, therefore, collecting all the water along Kafue Road from Cosmopolitan Mall to Kafue Roundabout.

Over 200 business properties along Kafue road had been connected; the Company was collecting sewer waste water from old and new pit-latrines using its newly constructed sewer line which was ten metres below the ground level.
The sewer water was then pumped to the upgraded treatment plants situated in Ngwerere, and Manchinchi; the Company had partnered with private companies, which were collecting sewer water from the pit latrines in an effort to protect the ground water.

The Committee was also informed that the Company had partnered with the Lusaka City Council and the Ministry of Health to ensure that sanitation was enhanced in a bid to avert non-communicable diseases; vii.
the pump stations constructed under the Lusaka Water and Sanitation Programme, and located along Kafue Road, were in close proximity with the main trunk, and this posed a danger to the continued existence of the infrastructure in an event that there was need to expand the road; and viii.
the Company had a sub-project whose objective was to expand the sewer network in Matero and the rehabilitation and construction of a new sewer network in Kaunda Square and other trunk sewers, as well as the Noxious Sewer Pump Station which was underway.

The Committee learnt that it was estimated that 22,000 people in Kaunda Square and 65,000 in Matero Townships would be beneficiaries of the sub-project.

208 b.
208 b.

Construction Chawama/Kuomboka and George Compounds 5500 Household Sanitation Facilities of in Kanyama, The Committee undertook a tour of the toilets which the Company was constructing under the Lusaka Sanitation Programme.

The Committee learnt that in Phase 1of the project, the Company would construct toilets as follows: 2750 toilets in Kanyama Compound; 750 toilets in Chawama Compound; and 2000 in George Compound.
The Committee heard that the project would improve access to safe sanitation, hygiene and reduce the spread of hygiene related diseases such as cholera and dysentery.

Overly, LWSC had embarked on the project in a bid to protect underground water through the use of adequate technology per ground conditions.

Arising from the tour of Chawama, the Committee learnt that: i. ii.
the project had adopted a Human Centred Design Approach, and 99,000 people were targeted to benefit in Chawama; the total cost of constructing the toilets was K 16,000.

The would-be beneficiaries (households) were expected to pay K2,400, in instalments, while the balance would be catered for by the project financing.
Furthermore, the households were expected to benefit from Faecal Sludge Management (FSM) Business through regular emptying of the containment facilities by FSM Service providers contracted by LWSC at a rate of K160 per barrel; and iii.

as at March, 2022, 5,500 toilets, had been handed over to customers who had made full payments.
c. Alternative Power Supply for boreholes (At shaft 5) The Committee toured a pump station situated in Lilayi which supplied water to Jack Compound using alternative power supply for the boreholes.

The pump station was connected to the ZESCO grid but also used alternative energy.

The Committee learnt that during the day, the pump operated using solar energy, while in the night the pump was operated using ZESCO power.
The Committee also learnt that Lusaka Water and Sewerage Company planned to install more than twenty boreholes and roll out a similar arrangement in Linda Compound in a bid to reduce dependence on ZESCO.
d. Kafue Bulk Water Supply Project Arising from the tour of the Kafue Bulk Water Supply, the Committee highlights the major findings as follows: i. the objective of the project was to increase surface water production from Kafue River in order to reduce the deficit on the ever-increasing demand for water in Lusaka City due to increased population growth, rapid urbanisation and industrialisation; ii.

the old plant was still operational with a capacity of 100,000m3/day; 209 iii.
the demand for water in Lusaka ranged around 420,000m3 per day as a result, the company constructed a 150,000m3/d capacity intake facility which was fully funded by the Government through a loan of US$ 150 million from the Exim- Bank of China; iv.
out of 150,000m3/d the company was only producing 50 000m3/d from the new plant and the remaining 100, 000m3/d would be undertaken in the second phase of the project, as it was not part of the initial financing; v. the contract was a Design Build and Operate, and the contractor handed over the project in 2016; vi.

on a daily basis, the total output was 280,000m3/d from the plant and all the boreholes, while the daily demand for Lusaka was 420,000m3/d.
As a result, there was still a deficit which required satisfying through phase 3 of the project.

vii.

the Company was spending colossal sums of money on the importation of chemicals used to purify the water.

Furthermore, the Company was importing chlorine gas from South Africa, but the supplier had since stooped to supply due to the demand for the same product, in South Africa.

The Committee also heard that the alternative reliable supply would be India, but this too would come at an exorbitant cost.
Committee’s Observations and Recommendations Arising from its interactions with the Lusaka Water Supply and Sanitation Company, the Committee makes the observations and recommendations listed hereunder.

i.

The Committee observes that colossal sums of money are invested in the Lusaka Sanitation Programme through loan financing from various financiers.
In this regard, the Committee recommends that Management should ensure that there is prudent financial management to ensure that the loans in question are serviced timely to avoid interest accrual.

ii.

The Committee observes, with concern, that despite the progressive investment made, the Company is still making losses, with a cost coverage ratio of 80 per cent; and that the main cost driver is electricity, whose tariff is not cost commensurate.
The Committee also observes that even if the cost of financing is removed from the company‟s current liabilities, the company would still record losses.

The Committee notes, further, that ZESCO is in the process of installing prepaid metres at all the facilities for Lusaka Water Company.

The Committee is concerned that this will affect the supply of water in the event that the Company fails to pay for power upfront and when the units run out, water supply is immediately cut off.
The Committee, therefore, recommends that the Ministry of Energy and the Ministry of Water Development and Sanitation, must promptly find an amicable progressive solution to the tariff paid by the water utility company as the cost of electricity, which is the main 210 driver of the cost of production for the utility company, The Committee is concerned that no one seems to be attaching the urgency to resolving the challenge of the cost of producing water vis-à-vis the cost of electricity, as well as the mode of payment.
iii.

The Committee observes that the Company is spending over K 1.2 million per month on the chemicals used to purify water.

The Committee further observes that the Company was importing chlorine gas from a South African Company which was no longer supplying the gas due to demand from the local companies in South Africa.
The Committee also observes that the alternative supply of chemicals would be to purchase the chemicals from India, but the company would have to purchase thirty cylinders required in a month, at a cost of K 42,000 per cylinder.

Consequently, the company was forced to source granular chlorine from local suppliers, which was proving to be more expensive than liquid chlorine.
The Committee recommends that the Company should consider revising its procurement policy to ensure that the supply chain is cost effective and consistent, so that cost saving measures are implemented.

The Committee also recommends that as a cost cutting measure, the Company should ensure that the staff establishment is reviewed to ensure that the Company has key and relevant staff with a lean structure.
Furthermore, Management should formulate strategies to reduce administrative costs and executive perks which are not payroll cost reflective.

iv.

The Committee observes that the Government owes Lusaka Water Supply and Sanitation Company Limited K 120 million in unpaid bills and that the Company intends to install prepaid meters in all Government entities consuming its water supply, to avert the challenge of unpaid for bills.
In this vein, the Committee recommends that the Secretary to the Treasury to support the initiative to install prepaid meters in all Government entities and help recover the debt.

2.

Ministry of Small and Medium Enterprise Development –Citizens Economic Empowerment Commission The Committee interacted with the Minister of Small and Medium Enterprises, the Permanent Secretary and the Acting Director General for the Citizen Economic Empowerment Commission (CEEC).
The key highlights from the interaction are as set out below.
The Minister informed the Committee that the mandate of the Ministry was to foster and accelerate the growth of the Small and Medium Enterprises (SMEs) in the country and that to foster the growth of SMEs, the Ministry had a policy direction which was anchored on three main pillars, to: a. build capacity among the SMEs so that when funds were disbursed, the entrepreneurs should have the necessary skills and competencies for them to make informed business decisions; 211 b. c. enable entrepreneurs have access to affordable financing; and link the entrepreneurs to various markets.
The Committee was informed that the Ministry had put in place programmes to help identify and know the needs of the SMEs and to inculcate a mindset change from desiring white-collar jobs to being self-employed, as this was bedrock of a flourishing entrepreneurial industry.

The Committee was also informed that the Ministry had a budget line of K350 million in the 2022 of estimates of expenditure, meant for empowerment and that K 90,000 was available for disbursement as at the time of interacting.
The Committee learnt that a new Board of Directors had been appointed at CEEC and that the Board would follow up on the issues that were raised in the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2018, especially with respect to non- performing loans, which stood at K 109, 567,518 (disbursed to six beneficiaries) as at the time of the audit.
The Committee was informed that most of the officers, including the Director General, were in an acting position and were not substantive office holders.

The Committee also learnt that the Ministry had formulated a road map in which it was going to review the following: a.

Citizens Economic Empowerment Act No.

9 of 2006; b. c. Small and Medium Enterprise Policy; and the guidelines for the disbursement of the funds.
The process was meant to enhance monitoring and evaluation and ensure that the necessary portfolios under CEEC were executing their mandate diligently especially with respect to risk management.

The Minister informed the Committee that CEEC was decentralised in all provincial centres, which were responsible for providing training to applicants, evaluating applications and undertaking monitoring and evaluations of investments.
The Committee learnt that the Ministry had formally requested the Office of the Auditor General to undertake a special audit of the CEEC.

2.1 Tour of Lupola Dairy Farm Lusaka West Lupola Dairy farm was one of the beneficiaries of the empowerment initiative for dairy farming for Chilanga District, which was spearheaded by CEEC.

The Committee learnt that the model of funding was that the CEEC was supposed to purchase the dairy animals and supply them to the farmers.
The farmers were then expected to keep the animals and then liquidate the loans through the sale of milk.

The Committee visited Lupola and the highlights of the visit are as set out hereunder.

i. Lupola Dairy Farm was a beneficiary of the capital financing for dairy animals from CEEC through an advert which was circulated in the print media.

212 ii.
212 ii.

The proprietor had applied for K 800,000 as initial capital outlay, but CEEC had a ceiling of K 500, 000, subject to CEEC acquiring the dairy cattle and delivering to the farmer.

iii.

The loan application was done in 2014 and CEEC was supposed to purchase the dairy cattle from South Africa.

However, this did not materialise, until 2016 when the proprietor requested for permission to purchase the cattle from within Zambia.
The proprietor acquired cattle from Southern Province, but it was of a lower standard and quality, which in turn affected the quality of milk production.

iv.

With respect to the shortfall on the initial capital which was applied for, CEEC failed to disburse the funds in question even though the proprietor needed the funds, as working capital.

As a result, the project was problematic from the first day as the proprietor lacked the requisite capacity to fully operationalise the project.
Committee’s Observations and Recommendations i.

The Committee observes that the CEEC performed dismally during the period under review, as evidenced by the amount that was cited as non-performing loans.

The Committee further observes that CEEC failed to deliver on its mandate as there was alleged external interference and consequently the established procedures and processes were not adhered to.
The Committee agrees with the Ministry of Small and Medium Enterprises on the need to review the framework that governs the disbursement of funds.

In this vein the Committee recommends that a timeframe should be provided within which the review shall be undertaken.

ii.
ii.

The Committee observes that the Commission has decentralised its operations and established centres in all the provincial centres, which have a mammoth task of evaluating applications for funding and eventually to carry out monitoring and evaluations vis-à-vis risk management.
The Committee recommends that the Ministry of Small and Medium Enterprises Development through the newly appointed Board of Directors should ensure that the officers in the provincial centres have capacity not to only look at an application for a loan on face value, but to also evaluate the capacity of the borrower which is often underrated.

In this way, the people who have no capacity to borrow from the banks should be given the priority to borrow from CEEC.

iii.
iii.

The Committee observes that the Auditor General is yet to conduct an Audit of the Commission.

The Committee recommends that this should be done expeditiously seeing that there is need to ascertain whether or not the staff in the Commission have the requisite skills set to ensure that the Commission efficiently delivers on its mandate.

213 iv.
213 iv.

The Committee observes that the failure by Lupola Dairy Farm to operationalise the project was due to insufficient and inconsistent funding from the Commission, which from the date of application, only actualised its response after two years, when the permutations had changed.

The Committee recommends that the Commission should fully finance any projects if ever they qualify for funding, as piecemeal funding has a negative effect on the actualisation of the project.
v. The Committee observes that in as much as Lupola has been liquidating its debt, its project is loss making.

The Committee further observes that the proprietor regretted that if he had known that CEEC would fund the project piecemeal, and would take longer to disburse the funds and provide the dairy animals, he would not have acquired the loan.

The Committee recommends that the Commission should promptly engage Lupola for consideration of refinancing, wavering the interest or write-off the debt.

3.
3.

Ministry of Technology and Science Industrial Research National Institute for Scientific and The Committee interacted with the Permanent Secretary for the Ministry of Technology and Science with respect to the National Institute for Scientific and Industrial Research, which was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies for the Financial Year Ended 31st December, 2019.

The key highlights from the interaction were as set out below.

a.
a.

Coal Briquette Plant The Committee learnt that the National Institute for Scientific Research (NISIR), owned a coal briquette valued at K 1,800,000, which had not been utilised from 2009, as at December, 2019.

The Committee was informed that the facility had been under utilised as the plant had been under litigation, and that the court had ruled in favour of NISIR.
The Committee learnt that following the ruling by the court, the plant was operating between 5 to 10 per cent to ensure that the equipment did not become obsolete.

In addition, the Committee heard that NISIR had numerous challenges among them: lack of resources to operationalise the plant; lack of human resource; old and malfunctioning equipment; which required constant specialised repair.
The Controlling Officer informed the Committee that the Ministry of Technology and Science had provided a budgetary allocation in the 2022 estimates of revenue and expenditure, for purposes of revamping the operations of NISIR.

The Committee also learnt that NISIR envisaged to expand its mandate from only producing coal briquettes and energy efficient cooking stoves, to becoming a hub of alternative energy.

214 b.
214 b.

Construction of a Laboratory under National Technology and Business Centre The Controlling Officer apprised the Committee that the National Technology Business Centre was a statutory body operating under the Ministry of Technology and Science.
The Committee learnt that the then Ministry of Works and Supply on behalf of the then Ministry of Science and Vocational Training, had engaged a contractor to build a textile laboratory, at a cost of K 265,400, which had not been completed nor handed over to the newly created Ministry of Technology and Science, as the contractor had not been paid for the work.
The Committee learnt that the contractor had executed 70 per cent of the construction works and that the Ministry of Technology and Science had requested the Ministry of Infrastructure to undertake variations on the structure.
The Committee heard, further that the project had been included in the estimates of revenue and expenditure for 2022 and that the variations were 23 per cent of the initial contract sum and that due to the variations in question and outstanding payments, the contract took longer than expected and consequently expired.

The Committee was informed that the contractor would return to the site as soon as the funds were made available.
The Controlling Officer also informed the Committee that the structure would be used as a digital innovation hub.

The operationlisation of the structure would accord the citizenry, who had digital innovation ideas, a platform to create software and other digital related products.
c. Tour of Laboratory Equipment in Kitwe The Committee toured the Kitwe Plant Science Institute under NISIR, to conduct a spot-check on the equipment received from the then Ministry of Higher Education, at a cost of K 4,126,570 and had not been in use for over five years.

The Committee observed that the building to house the equipment was at 80 per cent completion.
The Committee was informed that the Ministry of Technology and Science had allocated funds for the installation of the equipment in the estimates of revenue and expenditure for the year 2022.

The laboratory was supposed to operate to pharmaceutical standard and that NISIR would recruit scientists to work from the facility.
The Committee learnt that the facility would be operational by the end of 2022 and that its mandate was to localise the packaging of various medicines, both conventional and traditional.

Committee’s Observations and Recommendations i.

The Committee observes, with concern, the failure by NISIR to utilise the Coal Briquette Plant.
The Committee is, however, elated to note that plans are underway to revamp the operations of the plant with a vision to expand the operations from merely producing coal briquettes and energy efficient cooking stoves to a centre for alternative energy.

215 The Committee resolves to await an update on the re-operationalisation of the plant following the provision of funds in the 2022 budget.

ii.
ii.

The Committee is perturbed to note that the facility which had been built using colossal sums of money had remained un-utilised and incomplete due to inefficiencies among the responsible Ministries.

The Committee urges the Controlling Officer to ensure that all the outstanding works are implemented expeditiously and that the facility must be put to use.

iii.
iii.

The Committee notes, with concern, that the variation to the contract is pegged at 23 per cent of the contract sum, when any variation to a contract must not exceed 15 per cent and that in an event that it exceeds 15 per cent, the works must be retendered.

The Committee urges the Controlling Officer to engage the Ministry of Infrastructure, Housing and Urban Development to seek guidance on the matter.

The Committee will await a progress report.

4.


Lukanga Water Supply and Sanitation Company Lukanga Water Supply and Sanitation Company, was cited in the Special Report of the Auditor General on the Accounts of Water and Sanitation Companies for the Financial Year Ended 31st December, 2018.

The Committee toured Lukanga Water Supply and Sanitation Company and below are the main highlights of its tour.

i.
i.

The Committee was informed that Lukanga Water Supply and Sanitation Company operated in nine districts, namely: Chibombo; Chisamba; Kabwe; Kapiri Mposhi; Mkushi; Serenje; Mumbwa; Itezhitezhi; and Shibuyunji.

The Company was yet to commence operations in three districts namely: Chitambo; Luano; and Ngabwe.

The Committee was further informed that the Company serviced a population of 480,000 with customer connections of about three thousand two hundred.
The Committee was further informed that the Company had two main water sources, which were 65 per cent groundwater and 35 per cent surface water.

ii.

During the period under review, the turnover for the Company was K 61 million in 2021 and K 63 million in 2020, while its operational expenses were higher than its generated revenue.

iii.

Apart from generating its revenue from the supply of water, the Company equally offered onsite and offsite sanitation services.

iv.
iv.

To improve revenue collection from the supply of water and provision of sanitation services, Management had introduced online payment systems, and all manual receipts had been stopped.

216 v. The Committee was informed that the Company had numerous operational and administrative challenges which included the following: a. b. c. d. the Company had unpaid statutory obligations to Zambia Revenue Authority and National Pension Scheme Authority.
The Committee learnt that due to non-cost reflective tariffs, the Company was unable to generate the desired revenue and that there was a delay by the regulator and the Government to approve the application for tariff adjustments for 2022; the army barracks had accrued water bills amounting to K800,000 per month.
The Company planned to install post-paid metres in an effort to control the high-water bills; the Company had a demotivated workforce, as most of the employees had reached retirement age, and the Company needed K 10 million to pay the staff, as separation package; the Company had its profits eroded by the high cost of energy.
The Committee was apprised that Management, in conjunction with the other water utility companies, had engaged the Ministry of Water Development and Sanitation to engage ZESCO and the Energy Regulation Board on the revision of the ZESCO tariff; e. Management had a challenge of encroachment of water sources as most of the properties had no title deeds; and f. the other challenge was indiscriminate drilling of boreholes, which in turn affected the number of people that sought service provision from the Company.
vi.

The Committee learnt that the Mulungushi Treatment Plant had not been upgraded nor received any major maintenance since 1991.

The Company needed over US$ 10 million to fully overhaul the entire plant.

The Committee further heard that the Ministry of Water Development and Sanitation provided US$ US$2 million, which was meant to rehabilitate the water treatment plant and restore capacity through replacement of main equipment and rehabilitation of civil and auxiliary equipment and systems.
Committee’s Observations and Recommendations i.

The Committee observes, with concern, the failure by the Government through the Ministry of Defence, to pay its water bills timely, which in turn affects the Company‟s revenue generation.

ii.

The Committee recommends that the Secretary to the Treasury should intervene in the matter to ensure that the barracks are paying their water bills timely.
The Committee further recommends that the Ministry of Water Development and Sanitation should champion the installation of metres in both barracks situated in Kabwe.

217 iii.

The Committee observes that the cost of energy is very high and that it is the main driver of the production costs.

The Committee observes that the cost of production erodes the minimal profits that the Company generates.
The Committee urges the Ministry of Water Development and Sanitation and the Ministry of Energy to find an amicable solution to the challenge of the cost of energy.

iv.

The Committee observes that the water tariffs for the Company have not been reviewed since 2019, while the cost of production vis-à-vis the cost of energy and chemicals keeps increasing.

The Committee urges the Ministry of Water Development and Sanitation and the Ministry of Finance and National Planning to intervene in the matter.
v. The Committee observes, with extreme concern, that the infrastructure at the Mulungushi Water Treatment Plant is almost absolute as it has not had a face lift since 1991.

The Committee observes that Management was depending on two pumps which required constant maintenance on a dealing basis and that a complete overall would cost US$ 10 million.
In this vein, the Committee recommends that the Secretary to the Treasury must as a matter of urgency, intervene in the matter of rehabilitating the infrastructure under Mulungushi Water Treatment Plant, as there would be a catastrophe in an event that the machinery stopped working completely.

vi.

The Committee observes, with concern, that there is indiscriminate drilling of bore holes even in serviced areas.
The Committee, therefore, recommends that the Government should consider issuing a Statutory Instrument which will prohibit drilling of boreholes in areas that are serviced, as lack of control on the drilling of boreholes has a negative impact on revenue generation as such customers prefer to use their own bore holes as opposed to being serviced by the commercial utility companies.
Furthermore, the water utility companies should up their service provision so as to avert this indiscriminate drilling of boreholes.

5.

Mulungushi University Mulungushi University, which was the third public university in Zambia, was cited in the Report of the Auditor General on the Accounts of Parastatal and other Statutory Institutions for the Financial Year Ended 31st December, 2019.

The Committee undertook a spot-check visit of Mulungushi University and below are the highlights of the visit.

i.
i.

At inception, the Government committed towards infrastructure development, as well as to fund personal emoluments at gross pay for the first five years.

The Committee learnt that Konkola Copper Mines (KCM) Plc, had committed to provide US$ 17.5 million but only provided US$1 million.

to provide US$ 17million 218 ii.

From inception, the University was funded by the Treasury and that, as at the time of the review, the University had reduced its dependence on the Treasury to 11 per cent.

iii.
iii.

The University had invested K56million in infrastructure since inception from its own internally generated funds to bring the University to its acceptable state.

The Government of the Republic of Zambia had also been putting up infrastructure at the University, which included high rise student hostels, one lecture theatre and one dining hall.
Further, through funding from the African Development Bank, the Government had constructed a multipurpose hall as well as an Information and Communication Technological (ICT) Centre.

iv.

The major challenge for the University had been accommodation for students since the University did not have boarding houses around the surrounding community.

The University was surrounded by a Mwilaba Village, where the un-accommodated students would get accommodated, thereby, exposing them to bad vices.
The Committee further learnt that the University had a bed capacity of 3400 students but a student population of 9104 (both distance and full-time students) at the start of Semester I in September 2021 down to 7900.

Despite Mulungushi University being a preferred University for students in the recent past, most parents withdraw their children due to lack of accommodation.
v. In order resolve the problem of student accommodation, the Government through the Ministry of Higher Education engaged Covec (Z) Limited to construct 6 x 4 story student hostels at Mulungushi University which were supposed to create a bed space capacity of 960 students had they been completed.
However, the construction of the student hostels stalled in 2018 and the Contractor demobilised in 2019 due to non-payment of Interim Payment Certificates (IPC‟s).The Contractor had however been on site doing construction works at an extremely slow pace.

vi.

As a mitigation measure, Mulungushi University got a bank loan from Zambia Industrial and Commercial Bank (ZICB) to construct student hostels by way of demolishing and rebuilding the old United National Independence Party (UNIP) buildings.
Management settled the loan, two years ahead of time due to the high interest cost, thereby saving over K1million.

Further, Management had set aside K10 million in the 2022 budget and was using it to renovate ten old UNIP buildings to create 320 bed spaces by August, 2022.

Management was also converting ten common rooms to create 120 bed spaces by August, 2022.

This meant that the University would have 3840 bed spaces by the end of August, 2022.
Management had also bought bunk beds to be put in University staff houses which had been left by members of staff.

vii.

One of the University‟s growth strategies was to open the School of Medicine in Livingstone and that funds to a tune of K6million had been set aside in the 2022 budget for the purpose of constructing classrooms, laboratories and a library at their plot in Livingstone.
The University aimed to complete the construction by August 2022 and that the school was at break-even in terms of sustainability.

219 Committee’s Observations and Recommendations i.

The Committee observes, with concern, the stalling of the construction of student hostels in 2018 and the contractor demobilising in 2019 due to non-payment of Interim Payment Certificates (IPC‟s).
The Committee further observes that the contractor is still on site in as much as the contract for Covec (Z) Limited has expired.

The Committee also observes that the contractor is doing construction works at an extremely slow pace.
The Committee, therefore, recommends that the Ministry of Education in conjunction with the Ministry of Infrastructure, Housing and Urban Development, should promptly intervene in the matter to ensure that the hostels which are at about 80 per cent completion, are completed expeditiously.

ii.

The Committee observes that following Government‟s non-allocation of K150million for infrastructure in the 2022 National Budget, the University opted to construct the hostels using a Public Private Partnership (PPP).
The Committee observes that the University has engaged the Workers Compensation Fund Control Board, who have since conducted a feasibility study.

In light of the above, the Committee will await an update on the finalisation of the PPP programme.

iii.

The Committee observes that with respect to the query on lack of title deeds for eleven parcels of land, the actual parcels of land in question are six and not eleven.
The Committee further observes that following the Committee‟s the University terminated its services with the private lawyer and was using one of its law lectures to help the University acquire title deeds.

The Committee urges the Controlling Officer for the Ministry of Education to engage their counterpart Controlling Officer in the Ministry of Lands and Natural Resources to expedite the process of titling the parcels of land in question.

6.
6.

Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) was cited in the Report of the Auditor General on the Accounts of Parastatal of Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2018.The Committee undertook a spot-check visit to ZAAFICO, so as to get hands-on information on the operations and challenges of the entity.

Below are the highlights of the visit.

i.


The Committee learnt that ZAFFICO managed approximately 50,189ha of pine, eucalyptus; and Gmelina plantations in five provinces, namely: Copperbelt; Luapula; Muchinga; Northern and North-Western.

ii.

In February, 2020, ZAFFICO was listed on the Lusaka Securities Exchange (LuSE) and its stock traded under the symbol “ZFCO”.
The Government, through the Industrial 220 Development Corporation (IDC), held 63 per cent of shares while institutional investors and the general public and ZAFFICO employees held 37 per cent.

iii.

In 2018, ZAFFICO commissioned a Pole Treatment Plant which was a great milestone in the treatment of poles which stood at 140,000 per year.

iv.
iv.

The Corporation‟s overall performance had remained significantly strong with revenue of K 367 million in 2021, as compared to K 284 million in 2020, which represented a 29 per cent increase in revenue.

The major sources of revenue remained the sale of pure pine and eucalyptus, treated poles and Mukula, which was confiscated by the Government during the period under review.
v. ZAFFICO was air drying its poles before the poles were treated, which affected its ability to satisfy the demand of the market for clients such as ZESCO.

The Committee learnt that the Company was in the process of procuring a kiln which would enable it to effectively supply the market.

vi.

ZAFFICO managed seven seedling nurseries but had to import the seeds for pine at a cost of US$ 36,000 per annum.
The Committee also learnt that stocks of pine were being depleted hence the need to expand the plantations.

vii.

ZAFFICO‟s plantations were under threat due to mining activities.

The Committee was also informed that there was an influx of cheaper but poorly produced timber from some neighbouring countries, which had killed the demand for local timber.

viii.
viii.

The outstanding query on the land belonging to ZAFFICO (valued at K155million) where the Government had built the new Ndola Airport, the Government had not paid the money to ZAFFICO.

The Committee also heard that ZAFFICO had not acquired title for a number of its parcels of land.

Committee’s Observations and Recommendations i.

The Committee observes that ZAFFICO has capacity to satisfy the demand from ZESCO.
However, the challenge to supply ZESCO has been that ZAFFCIO air dries its poles, which in turn has a long lead time which makes ZESCO import its poles.

The Committee observes that ZAFFICO is in the process of procuring a kiln which will enhance its annual supply from K 70, 000 poles to K 280, 000.
The Committee, therefore, recommends that the Government through the IDC, should ensure that the process to procure the kiln is expedited so that ZESCO can stop importing poles and begin to purchase its poles from ZAFFICO.

ii.

The Committee observes, with concern, the depleting pine wood stock.

However, ZAFFICO is expanding its plantations and replanting the pine so as to avert the challenge.

221 The Committee, implementing an out-grower system.
in this regard, recommends that ZAFFICO should consider iii.

The Committee observes, with consternation, that ZAFFICO spends US$ 36,000 to import seeds for pine wood.

The Committee finds it unacceptable that there are no deliberate programmes to ensure that seed production is done locally.

In this vein, the Committee recommends that IDC should ensure that going forward, funds are injected in building capacity to be able to produce seeds locally.

iv.
iv.

The Committee observes with concern, that ZAFFICO‟s plantations are under threat due to issuance of mining licenses by the Government in its plantations.

The Committee is perturbed that there seems to be lack of coordination among the responsible Ministries of Mines and Mineral Development and the Ministry of Lands and Natural Resources as mining licences are issued without engaging ZAFFICO.
v. The Committee recommends that the responsible ministries should liaise and intervene in the matter to find a progressive solution 7.
National Sports Council of Zambia Levy Mwanawasa Stadium The National Sports Council of Zambia was cited in the Report of the Auditor General on the Accounts of Parastatal of Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2018.The Committee toured the Levy Mwanawasa Stadium to have an appreciation of how the National Sports Council of Zambia (NSCZ) and the Ministry of Sports Youth and Arts were operating on the Copperbelt.

Below are the highlights of the tour.

i. ii.


iii.

The Committee was informed that the Provincial Copperbelt office was an extension of the NSCZ and its sole responsibility was to manage sporting activities on the Copperbelt.

The Committee learnt that the Copperbelt office was funded by the Ministry of Youth Sport and Arts to a tune of K 2,500 per month to coordinate all sporting activities on the Copperbelt.
With respect to the query of lack of a governing council, the Committee learnt that the Council had not been constituted due to a delay at the Ministry.

Levy Mwanawasa Stadium was managed by the Ministry of Youth Sport and Arts, through a task force which consisted of seconded staff from other ministries.

The staff who managed the stadium were subjected to different conditions of service which was a demotivating factor among the staff in question.
The Committee was also informed that managing the stadium was a challenge due to an incomplete staff establishment.

iv.
iv.

The Committee learnt that the management of the stadium was marred with a number of challenges among them the following: 222 a. b. c. high water bills which amounted to K100,000 per month in addition to legacy bills to a tune of K 1million; there were no commercial boreholes to reduce dependence on Kafubu Water Supply and Sanitation Company; and there was dependence on ZESCO power supply and no capacity to power the entire stadium in an event that ZESCO did not supply power to the stadium.
There was a generator in place, which could only power half of the stadium.

This was against the rules set by the Confederation of African Football (CAF) Committee’s Observations and Recommendations i.

The Committee observes that there is no clear management structure to manage not only Levy Mwanawasa Stadium but all the newly constructed stadia.
The Committee, therefore, recommends that Government should consider forming an authority under the Ministry of Youth, Sport and Arts, whose responsibility shall be to manage the infrastructure, employ the relevant staff and ensure that the stadia are in a position to generate operational funds.

ii.

The Committee observes that Levy Mwanawasa receives treated water from Kafubu Water Supply and Sanitation Company, and that this water damages the plants around the stadium.
In this vein, the Committee recommends that Government should consider sinking the six commercial boreholes to supply water to the stadium.

iii.
iii.

The Committee observes that there is no alternative source of power to cater for the whole stadium in the event that ZESCO power failed, as required by CAF regulations The Committee, therefore, recommends that as a matter of urgency, the Ministry of Youth, Sport and Arts should intervene in the matter and ensure that the challenge of powering the stadium, in the event of power failure from ZESCO, as per CAF regulations is resolved.

8.
8.

Nkana Water Supply and Sanitation Nkana Water Supply and Sanitation Company (NWSSC) was cited in the Special Report of the Auditor General on the Accounts of Water and Sanitation Companies for the Financial Year Ended 31st December, 2018.

The Committee interacted with Nkana Water Supply and Sanitation and below are the highlights of the visit.
Nkana Water Supply and Sanitation Company was owned by Kitwe City Council (KCC) and Kalulushi Municipal Council (KMC), with shareholding of KCC 70 per cent and KMC 30 per 223 cent.

The Company operated in three towns, namely; Kitwe; Kalulushi; and Chambishi with 72,959 customers.

i.

In terms of water service, water supply was at 98 percent, while sanitation coverage stood at 79 percent.
The Committee was informed that metering coverage was at 90 percent and constancy of water supply was eighteen hours per day.

ii.

NWSSC was the Utility Company of the year 2020 and was the pioneer of E-Billing and Automated Meter Readers (AMR) in Zambia.

NWSSC successfully implemented the Nkana Water Supply and Sanitation Project Phase I (NWSSP I) in 2015.
The Project was funded by the African Development Bank (AfDB) to a tune of US$63m to cover the rehabilitation of water and sewerage installations in Kitwe, Kalulushi and Chambishi from 2010 to 2015.

NWSSC also utilised a Government grant of K 20million in 2011.

The major projects implemented were as outlined below.

a.

Constructed 1,448 water borne toilets in Wusakili.

b.

Installed new high lift pumps and motors.

c. Constructed a new water treatment plant 32,000m3/d.
d. Water towers and new transmission mains were constructed.

e. Established a new raw water source for Kalulushi at Mwambashi Dam.

Despite the above achievements, the company experienced challenges as listed hereunder.

i. NWSSC embarked on the Water Supply and Sanitation Project Phase II (NWSSP II) in 2021, financed by the Government, through the help of the Industrial and Commercial Bank of China, to a tune of US$ 199.580 million.
The project was being executed through an Engineering Procurement and Construction (EPC) contract, with China Henan International Cooperation Group (CHICO) as the contractor.

The Committee learnt that the project was prematurely suspended at 44 per cent of progress and 45.1 per cent of financial progress.

ii.

The cost of production was exacerbated by the high cost of energy and chemicals.

iii.

The old dilapidated water infrastructure and inadequate metering led to high non-revenue water.

iv.
iv.

The Utility Company was charging non-cost reflective tariffs.

v. The Company was owed huge sums of money in unpaid water bills.

vi.

There was inadequate liquidity.

224 Committee’s Observations and Recommendations i.

The Committee observes, with concern, the indefinite suspension of project works which has had adverse social economic effects on the community and the company‟s financial operations.
The work stoppage had exposed the project to threats of project time extension and cost escalation due to the contractor‟s claim of interest on delayed payments and on suspension of works which as at the time of reporting stood at US$ 4,485,497.44.

The Committee, therefore, strongly urges the Secretary to the Treasury to promptly intervene in the matter and ensure that the works on the project are resumed and the challenges surrounding financing are amicably resolved without undue delay.

ii.
ii.

The Committee observes that the challenge of the high cost of energy is common to all water utility companies.

The Committee, therefore, reiterates its recommendation for the Ministry of Energy and the Ministry of Water Development and Sanitation to handle the matter with the seriousness that it deserves.

iii.

The Committee observes that while NWSSC has been performing fairly well, it continues to grapple with inadequate liquidity, coupled with non-cost reflective tariffs.

iv.
iv.

The Committee, therefore, urges the Committee to intervene in the matter, considering that while water is a public good, it costs money to provide an efficient water and sanitation service to the citizenry.

9.

Development Bank of Zambia The Development Bank of Zambia was cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and other Statutory Institutions for the Financial Year Ended 31st December, 2019, with respect to non-performing loans.
One of the entities cited for a non- performing loan was Shimaini Investments Limited which acquired loan financing to construct a maize silo, milling plant and weigh bridge in Kitwe.

The Committee visited the entity and the following were the highlights of the spot-check visit to the milling plant.

i.
i.

The Committee observed that the project by Shimaini was viable, however, the intermittent funding by the Development Bank of Zambia (DBZ), which occurred for a period of three years, affected the take-off of the project.

The Committee further observes that interest started to accrue even before the Company was in full operation.

The Committee, therefore, recommends that going forward, DBZ should never commit to fund a project when it does not have the capacity to fully disburse the loan funds.

ii.
ii.

The Committee learnt that while infrastructure had been put in place for the milling plant, the main challenge was lack of working capital and the debt to equity was higher.

225 In this regard, the Committee recommends that DBZ should restructure the loan for Shimaini as the major funder to enable the company source funding from other financiers.

iii.

The Committee observes that DBZ has acquired preferential shares in Shimaini, using the outstanding loan repayments owed to DBZ.
The Committee, therefore, recommends that DBZ should not permanently acquire shares in Shimaini as this will set a bad precedence, but should instead promptly redeem its shares when the financial challenges of the company with regard working capital are resolved.
Photo Gallery Committee on Parastatal Bodies at the Lylonda Water intake in Kafue 226 Household Sanitation Facility built in Kanyama and Chawama Newly built pump station in Kafue 227 Tour of Lupola Dairy Farm, under the Citizen Economic Empowerment Commission Tour of Milling Plant under Shimaini-Funded by the Development Bank of Zambia 228 Tour of Lukanga Water Supply and Sanitation Company- dilapidated infrastructure Tour of Mulungushi University -newly constructed hostels 229 PART IV 26.0 SUBMISSION BY THE SECRETARY TO THE TREASURY ON THE RECOMMENDATIONS OF THE AUDITOR GENERAL i.
The Secretary to the Treasury submitted that with respect to failure to ensure that parastatal bodies and other statutory institutions had functional Boards of Directors to strengthen corporate governance, the Treasury would direct all Controlling Officers to process Board appointments a year before they expiry of a sitting Board.

ii.

On the failure to prepare financial reports in accordance with the Companies Act No.
10 of 2017, the Secretary to the Treasury submitted that they would undertake awareness activities for Management and Boards of State-Owed-Enterprises (SOE), through orientation, workshops, circulars, and meetings.

iii.
iii.

The Secretary to the Treasury submitted that on the recommendation for the Boards of Directors for Parastatal Bodies and other Statutory Institutions to ensure that effective performance assessment systems for Management were implemented, the Secretary to the Treasury submitted that Boards of Director would be oriented on the contents of the Public Finance Management Act regarding their responsibilities in the management of the Parastatal Bodies and other Statutory Institutions.

iv.
iv.

On the recommendation to ensure that parastatal bodies devise recapitalisation plans to improve their financial and operational performance, the Secretary to the Treasury submitted that the Boards of Directors of parastatal bodies and other statutory institutions would be directed to develop strategic plans that would address the operational cost, in line with section 64 of the Public Finance and Management Act No.
1 of 2018. v. On the recommendation to ensure that the responsible Ministries for statutory institutions ensured that sufficient funds were sourced to enable the institutions meet their mandate, the Secretary to the Treasury submitted that efforts were being made to redesign the budgets so that sufficient funds would be provided for statutory institutions.

vi.
vi.

On the recommendation for parastatal bodies and other statutory institutions to ensure that procurements were made in line with the Public Procurement Act No.
8 of 2020, the Secretary to the Treasury submitted that the Ministry of Finance and National Planning was in consultation with Management Development Division (MDD) at Cabinet Office, to restructure the Ministry of Finance and National Planning so that there was a Division in the Ministry responsible for policies and standards with regards to public procurement.

vii.
vii.

The Secretary to the Treasury submitted that with regard to the recommendation for Management of parastatal bodies and other statutory institutions to address the internal control weaknesses to enhance systems and protect assets, including acquisition of title deeds for land owned by the institutions, the relevant bodies would be engaged to enhance internal controls and land title acquisition would be prioritised.
230 27.0 GENERAL OBSERVATIONS AND RECOMMENDATIONS Following the Committee‟s interaction with the Controlling Officers and Chief Executive Officers for the entities that were cited in the Report of the Auditor General on the Accounts of Parastatal Bodies and Other Statutory Institutions for the Financial Year Ended 31st December, 2020, the Committee observed a number of overarching challenges.
In light of this and to address the various areas of weaknesses in the management of parastatal bodies and other statutory institutions, the Committee makes recommendations as set out below.

(i) The Committee observes that the statutory bodies and state-owned enterprises cited in the Report failed to actualise their planned for budgets and income targets, both from internally generated funds and the funding which was expected from Treasury.
The Committee observes that failure to raise budgeted for funds has a negative impact on the entities‟ ability to undertake activities and programmes that fulfil their respective mandates.

The Committee, therefore, recommends that the Secretary to the Treasury must ensure that the budgets and approved for funds are disbursed timely and in the right amounts.
The Controlling Officers, on their part, must ensure that their entities adhere to the provisions of section 20 (a) and (b) of the Public Management Act No.

1 of 2018, which provides for the need to ensure that revenue generation is properly forecast, considering other binding constraints within the macroeconomic framework.

(ii) The Committee observes that there are sufficient laws and regulations to enhance efficiency in the public service.
However, there is extreme inertia and an unacceptable attitude of business as usual among the public officers entrusted with the responsibility to manage the parastatal bodies and other statutory institutions.

The Committee observes that the Secretary to the Treasury has the mandate to ensure that the laws, regulations and various established guidelines, with respect to the Public Finance Management Act No.
1 of 2018, are strictly adhered to, in order to assure efficient management of state-owned enterprises and other statutory institutions.

In this vein, the Committee strongly recommends that the Secretary to the Treasury must ensure that he expedites the process of bringing to book, all officers found guilty of failure to ensure effective and efficient management of the entities, in accordance with section 64 of the Public Finance Management Act No.
1 of 2018, and that the Auditor General on his part, must enhance audits of service delivery.

(iii) The Committee observes that in an effort to enhance foreign reserves, the Bank of Zambia reverted to purchasing gold which was included in the gross international reserves position.

The Committee observes that the Bank does not, however, have a Gold Policy which should stipulate the management of the gold in question.
In this regard, the Committee recommends that as a matter of urgency, the Bank of Zambia should formulate a Gold Policy.

231 (iv) The Committee observes that the Public Finance Management Act No.

1 of 2018 is the supreme law with respect to the management of public funds, vis-à-vis the management of public entities and is only subservient to the Constitution of Zambia.
In light of this, the Committee recommends that, as a matter of urgency and to ensure that the audit process and the oversight function of Parliament are not for cosmetic purposes, the Government should establish fast track courts to deal with matters of financial misconduct in accordance with the Public Finance Management Act No.

1 of 2018.
1 of 2018.

(v) The Committee observes, with grave concern, the tendency by Government to either buy shares or inject working capital in non-performing statutory institutions or state-owned enterprises, which does not solve the underpinning challenges but only creates a vicious circle where the Government is always expected to bail out such entities t which after a few years, are back to recording poor performance.
The Committee, therefore, strongly recommends that the Government should avoid bailing out non-performing entities over and over again but should instead focus on identifying the root cause of failure to deliver on their respective mandates and institute the necessary changes.

(vi) The Committee observes, with concern, the failure by the Government to promptly pay for the services provided by the various statutory institutions and state-owned enterprises.
This in turn erodes the entities‟ ability to deliver on their mandates and leads to the unacceptable trend of debt swaps which deny companies the required liquidity.

The Committee, therefore recommends that Government should always pay for its services just as it pays for services provided by the private sector in order to help the entities perform to expected standards.
(vii) The Committee observes that the tendency by the Road Transport and Safety Agency to processes Road Tax licences on a quarterly basis, denies the Agency revenue from motorists who may wish to pay for Road Tax within the quarter or a month before the quarter ends as the motorists prefers not to pay until a new quarter commences, In light of the above, the Committee strongly recommends that the Agency should consider, as a matter of urgency, formulating a mechanism of processing Road Tax licences even for a month, as opposed to strictly on a quarterly or annual basis; (viii) The Committee observes, with concern, the lack of clear guidance on how parastatal bodies and other statutory institutions should consider Government circulars, in relation to the varying establishing Acts of Parliament and the Companies Act No.
10 of 2017.

The Committee observes that during the period under review, the Industrial Development Corporation and National Health Insurance Management Authority, procured personal to holder vehicles in line with the respective conditions of service and the respective Boards of Directors decision, which was contrary to the directive of Cabinet Circular of 2015, 232 which was referenced in Cabinet Circular No.17 of 2016 and Cabinet Circular No.

1 of 2021.
1 of 2021.

In this vein, the Committee recommends that the Secretary to the Treasury and the Secretary to Cabinet should promptly intervene in the matter and give guidance with regard to adherence to Cabinet Circulars, in an event that they speak contrary to the establishing Acts and conditions of service for the respective entities.

The Committee further urges the Secretary to Treasury to give policy guidance on the procurement of personal-to-holder vehicles by parastatal bodies.
(ix) The Committee observes, with concern, the propensity by individuals to encroach on institutional land which is on title, contrary to the Lands Act.

No.

29 of 1995.

The Committee, therefore, recommends that as a matter of urgency, the Executive must establish systems that ensure stiffer punishment for anyone flouting the law.
(x) The Committee observes that the National Housing and Authority Act, Chapter 195 of the Laws of Zambia, is being reviewed to enable it respond to new trends and to establish the National Housing Authority to be an Authority on matters of housing management in the country and enhance its regulatory function.

The Committee recommends that the Executive should expedite the process of reviewing and amending the National Housing and Authority Act Chapter 195 of the Laws of Zambia.
(xi) The Committee observes, with concern, that water utility companies are owed colossal sums of money by Government entities through unpaid utility bills, accrued on post-paid metres.

The Committee further observes that most water utility companies plan to install prepaid metres as a way of forestalling battles with Government entities, with regard to paying for the services rendered to them.
The Committee recommends that the Government should support the initiative to install prepaid metres as this will help the companies raise the much-required revenue timely.

(xii) The Committee observes, with concern that the Citizen Economic Empowerment Commission (CEEC) performed dismally with respect to disbursement and collection of loans from the beneficiaries.

The Committee observes that there is need to review the legal framework governing the operations and management of CEEC.
The Committee recommends that the Executive should expedite the process of reviewing the existing legal framework to enhance efficiency in the disbursement and recovery of funds from beneficiaries.

(xiii) The Committee observes that there are beneficiaries whose operations are affected by the inefficiencies of CEEC.

The Committee further observes that such entrepreneurs (for 233 example Lupola Dairy Company), have genuinely struggled to liquidate the loans in question.
In this regard, the Committee recommends that CEEC should consider restructuring such loans and where necessary, wavier interest charges.

(xiv) The Committee observes, with concern, the absence of a structured mechanism of managing newly built stadia such as Levy Mwanawasa and Heroes.

Instead, they are being managed by ad hoc committees constituted by staff seconded from various ministries.
The Committee, in this vein, recommends that the Executive should consider establishing an Authority which will be responsible for managing of newly built stadia.

(xv) The Committee observes that Zambia Forestry and Forest Industries Corporation (ZAFFICO) plantations are under threat due to mining activities taking place in their plantations, with mining licences being issued by the Government.
The Committee is perturbed that there seems to be no coordination among the responsible Ministries of Mines and Mineral Development and the Ministry of Lands and Natural Resources, as the issuance of mining licenses without engaging ZAFFICO is unacceptable.
The Committee, therefore strongly recommends that the responsible ministries should intervene in the matter and find a progressive solution (xvi) The Committee is elated to observe that Mongu Trades runs a two-tier education, where pupils get to be exposed to various skills, as opposed to only learning about theories that leads to a search for white collar jobs.
In light of the above, the Committee strongly recommends the Government should replicate the system at Mongu Trades in the delivery of teaching to other tertiary institutions of learning.

28.0 CONCLUSION State-Owned Enterprises (SOEs) and other statutory institutions have an important economic role in several countries.
According to the International Monetary Fund (IMF),in a paper by Bower, Uwe dubbed “The Good, the Bad, and the Ugly”, SOEs‟ aggregated across all sectors, contribute between 1and 12 percent to total economic output, and between around 0.5and 8 percent of total employment.SOEs occupy an important niche in the pursuit of development for any economy, including advanced economies.

SOEs are most prevalent in strategic sectors such as energy, minerals, infrastructure, other utilities and, financial services.
However, most SOEs do not perform as expected due to numerous challenges such as: lack of clearly defined performance targets and monitoring mechanisms; lack of an oversight system which has teeth to perform an effective oversight; limited supervision and lack of medium-term performance benchmarks and an ineffective tracking of activities.

234 APPENDICES Appendix I –List of National Assembly Officials i. Mr C Haambote, Acting Principal Clerk of Committees ii.
Mrs D Mukwanka, Acting Deputy Principal Clerk of Committees (FC) iii.

Mr C Chishimba, Acting Senior Committee Clerk (FC) iv.

Mr E I C Chilimboyi, Committee Clerk v. Mrs V B Tembo, Typist vi.

Mr M Chikome, Committee Assistant vii.

Mr D Lupiya, Committee Assistant viii.
Mr M Kantumoya, Parliamentary Messenger 236 Appendix II – List of Witnesses List of Witnesses Ministry of Finance Mr D K Chisenda, Acting Secretary to the Treasury Mr C J Kapambwe, Senior Economist Mr K Musonda, Accountant General Mr M Kachela, Chief Accountant Ms J Mukuwa, Director Mr E Manunga, Principal Accountant Ms O Darris, Assistant Director Ms N M Sichilongo, Acting Controller of Internal Audit Mr M Moyo, Principal Budget Analyst Mr M Chama, Senior Accountant Mr M Chita, Principal Accountant Ministry of Education Ms N Muneku, Permanent Secretary Mr F Katulwende, Director of Finance Mr C Mulenga, Director University Mr M Zulu, Assistant Accountant Ministry of Technology and Science Mr B Habeenzu, Permanent Secretary Mr A Simumba, Director Vet Mr L Lubasi, Assistant Director Mrs J M Chinkusu, Director Science and Technology Mr K Kwete, Chief Accountant Ms C P Banda, Executive Assistant to Permanent Secretary Ministry of Labour and Social Security Mr B C Nalishiwa, Permanent Secretary Mr V Mwaba, Director Mr P Chilambwe, Assistant Director Mr G Kashinka, Director Mr A Dumingu, Director-Social Security Ministry of Transport and Logistics Mr F Mwalusaka, Permanent Secretary Mr B Kaambwa, Assistant Director Mr S Mbewe, Director Planning Ms J Simuyi, Director Finance Mr Z Phiri, Director Maritime Ms I Tembo, Chief Planner Mr F Chanka, Registrar of Vessels 237 Mr K Mukelebai, Principal Accountant Mr T Phiri, Accountant Mr P Mulola, Acting Director Transport Ministry of Infrastructure, Housing and Urban Development Mr D Mfuwe, Permanent Secretary Mr M Chilembo, Director Housing Ms J Shiwanga, Accountant Ministry of Health Dr G Magwende, Permanent Secretary-Administration Ms N Zulu, Chief Accountant Ministry of Agriculture Mr G Mbozi, Permanent Secretary Ms M Likambi, Acting Director of Finance Ms P Mwewa, Director PPD Mr M Mwala, Director-Agriculture Judiciary Ms N Imataa, Chief Administrator Ms Y Nalomba, Registrar Ms M K Chombo, Principal Accountant Mr C Chiwewe Director Human Resource and Administration Mr G
 Kamaji, PP-Quality Surveyor Ms C Luswili, Sheriff Mr K Suliwulu, Accountant Mr L B Sikana, Chief Planner Mr K Ngandu, D/D/R Administration Mr V Chileshe, Chief Accountant Mr M Chileshe, PP- Civil Engineer Mr K Phiri, Accountant-PAC Bank of Zambia Mr D H Kalyalya, Bank Governor Ms R Mhango, Deputy Governor-Administration Dr E Pamu, Advisor to Governor Mr I Muhanga, Director Financial Markets Ms P Malilwe, Director Finance Mr L Kamanga, Director Banking and Currency Ms J Couvaras, Senior Legal Counsel Dr J Lungu, Executive Assistant – Governor Mr N Kabwe, Acting Assistant Director-Communications Copperbelt University Mr P Chisale, Acting Vice Chancellor 238 Ms R M Mulenga, Chief Financial Officer Mr B C Mabo, Director Planning Ms F K Bwalya, Assistant Director ICT Mr B M Chishimba, Procurement Manager Luanshya Technical and Business College Mr E Chishimba, Acting Principal Mr J Mwansa, Procurement Officer Ms R K M Chonde, Accountant Mongu Trades Technology and Science Mr E N Mooto, Principal Mr I G Mwanang`ombe, Accountant National Health Insurance Management Authority Mr J Kapesa, Director General Mr D Kangwa, DFI Mr T Siwale, DHIS Mr N Miyanda, Audit and Risk-Head Ms K C Zulu, D-Legal Services and Authority Secretary Zambia Education Publishing House Mr C Zimba, Director Ms E M Mwanza, Human Resource Manager Mr F Ngwisha, Finance Manager Mr M Mwanakalungi, Works Manager Mr B Mubili, Human Resource and Administration Officer Mr M Mwala, Financial Accountant Ms A Phiri, Acting Marketing Manager Kapasa Makasa University Mr J Mwitwa Vice Chancellor Ms L M Mukuka, Deputy Registrar Mr L P Mwansa, Head Finance Ms R M Mulenga, Chief Financial Officer Mr M Kunda, MTCE Officer ZSIC GENERAL INSURANCE Mr C K Nakhoze, Managing Director Mr C Sichande, Director Legal Ms S K Nguluwe, Director Technical Ms L Kalimamukwento, Assistant Director Mr M Masiye, Director Branches ZSIC Life Insurance Plc Mr K Siamuwele, Managing Director 239 Mr K C Petulu, Director Finance Mr C Masua,
 Director ICT Mr J Chirwa, Project Lead Zambia Medicines Regulatory Authority Mr M Siyanga, Acting Director General Mr M Banda, Director Corporate Services Mr L Nyambe, Acting Director Medicines Control Mr B Chilinde, Director Laboratory Services Industrial Development Corporation Mr H Sakala, Acting Group Chief Executive Officer Ms C Sokoni, Chief Financial Officer Ms S Kaweza, Principal Research and Strategy Analyst Ms M Chongo, Executive Assistant Mr M Kasongola, Chief Investment Officer Ms P Musepa, Chief Corporate Service Mrs L M Ngoma, Chief Legal Officer Mr P Lupaka, Chief Internal Audit Nitrogen Chemicals of Zambia Limited Mr W Mwale, Chief Executive Officer Mr T Sakalimbwe, Finance Manager Mr M Mboma, Financial Accountant Mr A E Mutambo, Chief Finance Officer Bangweulu Water Transport Mr C Musonda, Manager Zambia Airport and Corporation Limited Ms M Banda, Ag Managing Director Mr M I Chasha, Director Human Resource Capt M Luneta, SMTS Mr A Bvulani, Director Airport Services Mr P A Mubanga, Manager Civil Engineering Ms G Mazumba, Director Finance Times Printpak Mr S Simate, Managing Director Mr E Kaliwile, Director Finance Mr C Maseka, Director Commercial Zambia Daily Mail Mr S Simate, Managing Director Ms T Phiri, Company Secretary Mr E M Kaliwile, Director Finance 240 Mr C Maseka, Director Commercial National Housing Authority Ms W N Yambala, Chief Executive Officer Mr C Chipalo, Director of Finance Mr R S Mubu, Finance Manager Mr C Chewe, Director Finance National Science and Technology Council Mr G Mugala, Acting Executive Secretary Mr O Nyirenda, Accountant Ms A Mulonga, Programme Officer Tobacco Board of Zambia Mr J R Kasongo, Chief Executive Officer Mr O Chinyanga, Chief Finance Officer Mrs E N Chitengi, Human Resources Manager Mr R Mwale, Audit and Risk Manager Mr T Kasongole, Chief Operations Officer Road Transport and Safety Agency Mr G Banda, Chief Executive Officer Ms V Mupunda, Head- Audit and Risk Ms J M Mumba, Procurement Mr P Saiwana, Head
 Finance Mr F Mubanga, Head Public Relations Mr B Sizure, Head ICT Mr A Tembo, Legal Counsel Mr J Mumba, Deputy Director Transport Mr A Msisisa, Deputy Director Safety Mr C Kanchele, Head Research and Planning Auditor – General`s Office –Permanent Witnesses 1.
Dr. D C Sichembe, Auditor General Mr A Mwelwa, Director (Principal Debt Investment) Ms M C Kasungamulilo, Senior Auditor (Parastatal) Mr G Tembo, Senior Auditor (Planning) Mr L Sinyami, Auditor (Planning) Mr S Munyama, Auditor Mr D Siame, Director-PAAD Mr S Phiri, Assistant Director Mr D Kasonde, Principal Auditor Mr S Nkandu, Senior Auditor Mr L Makasa, Principal Auditor (Parastatal) Mr F Chewe, Executive Assistant to Auditor General 241 Ms D Kazembe, Principal Auditor (Parastatal) Ms S Mweemba, Senior Auditor (Parastatal) Mr C Simbeye, Senior Auditor (Parastatal) Mr R Hamubayi, Assistant Auditor (PPI) Mr E Tembo, Director-Specialised Audits Mr J Mulenga, Assistant Director-Specialised Audits Mr A Mweemba, Principal Auditor-Specialised Audit Mr M Mponda, Principal Auditor Mr T Mwalongo, Auditor Mr Z Mukamba, Auditor Mr O Mutale, Auditor (Parastatal) Mr I Kaira, Assistant Auditor Mr M Mtonga, Assistant Director (Revenue) Mr K Chilao, Assistant Director Ms H Kapeso, Auditor 2.
Accountant General`s Office Ms M C Malisawa, Senior Accountant Mr J Kamuchele, Senior Internal Auditor Mr C Mulonda, Controller of Internal Audit Mr F Ngwenya, Director- Audit Policy and Quality Assurance Mr E Zimbizi, Senior Accountant, Senior Accountant Ms M Chita, Principal Internal Auditor Mr M Chama, Senior Accountant 242